EU Finance Ministers approve VAT changes to ETS fraudsters

EU Finance Ministers approved in December an amendment to EU VAT (value-added tax) rules in a bid to prevent fraudulent practices connected with the EU ETSⁱ (see November 2009 Eurobrief). There have been alleged cases where carbon traders kept the VAT instead of notifying it to tax authorities, and there have been fears that the prevalence of these so-called carousel fraudsters could undermine the system. Pending the advisory opinion of the European Parliament, this proposed Directive would allow Member States to implement, on an optional and temporary basis, a reversal of liability for the payment of VAT on greenhouse gas emission allowances. This would remove the need for VAT to change hands between the carbon traders every time carbon credits are sold. The cut-off date approved by the Council through a unanimous vote is six months later than the European Commission’s original proposal.

The Commission’s original proposal can be found here:

http://ec.europa.eu/taxation_customs/resources/documents/common/legislation/proposals/taxation/COM%282009%29511_en.pdf

The Council’s position can be found on page 8 of the following press release:

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/111706.pdf