Five countries from Central and Eastern Europe are urging joint action, such as the extension of the reverse-charge VAT mechanism, Minister for National Economy Mihály Varga told MTI in a telephone interview from Vienna, where the Czech, Slovak, Austrian and Bulgarian finance ministers held a conference on combating VAT fraud.

As the Minister pointed out, VAT evasion and fraud cause huge problems in the region. The so-called “carousel-fraud” and “missing trader fraud” schemes are uniform practices within the entire EU, as there are no inner borders and fraudsters can easily make money by transporting goods between countries.

In Hungary, the loss in fiscal revenues due to VAT fraud is estimated at EUR 1.5-2bn per year, he said. The main objective of the conference was, he added, to promote common action based on mutual agreement and to introduce reverse-charge VAT.

As he stressed, this mechanism had already been introduced in Hungary for cereals, and that has made the sector substantially more transparent and the measure has resulted in higher fiscal revenues. However, last year the European Commission blocked the introduction of reverse-charge VAT on sugar and related products.

There are some differences in standpoints of individual countries, as for example the Czech and Bulgarian proposal recommends reverse-charge VAT to be applied for certain types of goods above a given value limit, either EUR 5000 or EUR 10 000.

Mihály Varga emphasised that reverse-charge VAT could work well in the region and tax fraud involving cross-border transports could be more effectively spotted.

Negotiations will be continued at several forums, and participants “want to persuade the authorities in Brussels to make a decision.”

Any other country can join the initiative, Mihály Varga said. German representatives also participated at the meeting as observers, although they favour a sectoral mechanism instead of a reverse charge VAT for every product.

(Ministry for National Economy)