Labour MEPs: UK must back EU measures to tackle VAT fraud and keep them after Brexit

The UK government must back EU action to combat cross-border VAT fraud, and abide by any new measures post-Brexit, Labour MEPs have warned.

The European Parliament voted today vote for a report calling on national governments to update the European Union’s common VAT system by bringing in new laws to clamp down on fraud. Fraud involving VAT on goods exported to other member states costs EU taxpayers an estimated €50 billion (£42.5bn) a year, while, the ‘VAT gap’ between expected revenue and revenue actually collected is estimated at €170bn (£144bn).

VAT has to be paid in the country where the customer lives so if you sell goods to someone in another member state you don’t have to pay VAT on them in your own country. It is possible to take advantage of this exemption by creating a fictitious company that buys VAT-free goods from another member state and then sells them with VAT in its own country before disappearing to avoid passing on the VAT to the tax authorities.

Anneliese Dodds MEP, Labour’s European Parliament spokesperson on taxation, said:

“MEPs have today sent a clear message to Europe’s finance ministers: agree measures to tackle VAT fraud and implement them. The reform of the EU’s VAT rules are long overdue and could end up saving Europe’s taxpayers up to £150 billion.”

Labour MEPs are also calling for the UK and other EU governments to agree to a tax exemption on key items like sanitary products and renewable energy.

Ms Dodds added:

“Scraping the outdated and unfair tampon tax is long overdue and the UK government must now work with its colleagues in the European Council to eradicate the tax. Tampons and other sanitary products are essential items for many women and they should not be subject to VAT.”