TAXATION: NEW REPORT POINTS UP SHORTCOMINGS IN ADMINISTRATIVE VAT COOPERATION.

The system set up by Council Regulation 218/92/EEC was designed to enable goods to move from one Member State to another without frontier controls. It relies upon exempting intra-Community supply of goods with taxation taking place in the Member State of destination. The exemption mechanism makes the VAT system prone to fraud as goods can circulate tax-free. Community instruments for administrative cooperation together with national control systems should be used to combat this threat. In line with the Council Regulation, the Commission submits a report every three years on VAT collection and control procedures.The creation of the Single Market has not resulted in a change in national VAT control methodology and no priority has been accorded to the control of intra-Community trade, indicates the Commission's report. The only significant change has been the setting up of a VAT Information Exchange System, but even this is not used in the most efficient manner. There is no indication that Member States are reacting to this situation by increasing the amount of resources that are devoted to VAT control. Only about 8% of tax officials are actually engaged in controls of VAT traders with the result that it will take about 40 years to make inspection visits to each of the 24 million taxable persons in the Community.The Commission reports on weaknesses in terms of information technology. New technology such as electronic invoicing and self-billing exists but Member States in general are ill prepared to meet the new environment. Currently, only 3% of tax auditors are skilled in computer auditing.An examination of Member States' activities has shown a very low level of administrative cooperation. The number of exchanges of information is very low, both as regards spontaneous information as well as specific requests. Finally, the report notes that administrative cooperation is hampered...