The 2016 Erasmus+ report confirms the key role played by the programme in building a more resilient Europe united around common European values.

With a 7.5% increase in the Erasmus+ budget compared to the previous year, the EU invested a record €2.27 billion to support 725,000 Europeans with mobility grants to study, train, teach, work or volunteer abroad. This brings the total to more than €2 million since 2014. In 2016, 21,000 projects received funding involving 79,000 education, training and youth organisations – 15% more projects than in 2015.

Commissioner for Education, Culture, Youth and Sport, Tibor Navracsics, said: “Erasmus+ has now reached the halfway point of its seven-year journey. I am proud to see how the programme has acted as a driver for unity in Europe, contributing tostrengthening the resilienceof individuals and our society. Erasmus+ mobility develops skills and competences and reinforcesa European identity that complements and enriches national and regional identities. This is why we encouraged EU leaders meeting in Gothenburg on 17 November to work towards a European Education Area and tomake mobility a reality for all by 2025, doubling the number of Erasmus+ participants and reaching out to people coming from disadvantaged backgrounds.“

The report demonstrates that Erasmus+ is well on track to meet its target of supporting 3.7% of young people in the EU between 2014 and 2020. It also shows that the programme has the potential to contribute to making mobility while learninga norm – a goal set out by the Commission in its Communication on “Strengthening European Identity through education and culture” discussed by the EU leaders at their Working Lunch in Gothenburgon 17 November.

In the 2015/2016 academic year, Erasmus+ enabled higher education institutions to send and receive 330,000 students and staff, including 26,000 to and from partner countries. France, Germany and Spain were the top three countries in terms of sending students and staff, while Spain, Germany, and the United Kingdom were the three most popular destinations.

The report published today also shows how Erasmus+ contributed to respond to wider social challenges in 2016. This includes actions to promote social inclusion and ensure that young people acquire social, civic and intercultural competences and learn to think critically. This includes for example:

• In 2016, €200 million from the Erasmus+ programme supported 1,200 cooperation projects focused on promoting tolerance, non-discrimination and social inclusion.
• The youth sector, with projects targeting refugees, asylum seekers and migrants, was particularly active in this field.
• A specific call for proposals (€13 million) was launched for the development of policies and strategies to prevent violent radicalisation and foster the inclusion of disadvantaged learners, including people from migrant backgrounds. The call financed 35 projects involving 245 organisations.

Erasmus 30^th anniversary: A successful campaign

The publication of the report coincides with the closing of the campaign celebrating the 30^th anniversary of the Erasmus programme and the presentation of the Erasmus+ Generation Declaration on the future of Erasmus+. Throughout 2017, more than 750,000 people took part in over 1,900 events in 44 countries to celebrate and discuss the future of Erasmus+. 65,000 articles on the programme were published and shared over two million times on social media, reaching over 90 million people. The new Erasmus+ Mobile App launched in June 2017 has already been downloaded more than 22,000 times.

In Gothenburg, President Juncker invited the EU leaders to double the number of young people in the EU participating in Erasmus+ by 2025, which will require a budget of €29.4 billion for the period 2021-2027. During their meeting, the EU leaders agreed to step up mobility and exchanges, including through a substantially strengthened, inclusive and extended Erasmus+ programme for all categories of learners.

The Commission also invited the Erasmus+ Generation to engage in the debate and created the Erasmus+ generation online meeting point. Their discussion resulted in 30 recommendations on how to make Erasmus+ a bigger programme with a bigger impact on the future of Europe. The Declaration drawn up by the Erasmus+ Generation will be officially presented and debated today during the closing event of the anniversary campaign.

Background

Erasmus+ and its predecessors are among the most successful programmes of the European Union. For three decades they have been offering opportunities to gain new experiences to young people in particular, and a chance to broaden their horizons by going abroad. What started as a modest mobility scheme for higher education students back in 1987 – with only 3,200 students in its first year – has developed into a flagship programme benefiting around 300,000 higher education students per year.

The current Erasmus+ programme, running from 2014 to 2020, has a budget of €14.7 billion and will provide opportunities for 3.7% of young people in the EU to study, train, gain work experience and volunteer abroad (i.e. around 3.3 million young people over the period). The geographical scope of the programme has expanded from 11 countries in 1987 to 33 currently (all 28 EU Member States as well as Turkey, the former Yugoslav Republic of Macedonia, Norway, Iceland and Liechtenstein). The programme is also open to partner countries across the world.

More information

Memo

Erasmus+ Annual Report 2016

Erasmus + factsheet

Country-specific factsheets

Factsheet on the 30^th anniversary of Erasmus

Factsheets on the European education area

Today, the Commission is publishing the Erasmus+ Annual Report 2016, which covers the third year of Erasmus+, one of the European Union’s most successful and iconic programmes. Since 2014, it has become much broader, providing opportunities for study periods and traineeships/apprenticeships for both higher education and vocational education and training students, youth exchanges, volunteering and staff exchanges in all fields of education, training and youth as well as projects in the field of sport. Erasmus+ is also more open to people from disadvantaged backgrounds than any of its predecessors.

What were the main developments in 2016?

In 2016 Erasmus+ was instrumental in supporting Member States to promote social, civic and intercultural competences, in line with the goals set out in the Paris Declaration:

• €200 million were allocated to 1,200 cooperation projects targeting the promotion of tolerance, non-discrimination and social inclusion. Particular attention was given to the selection of projects involving refugees, asylum seekers and migrants principally in Youth mobility.
• A dedicated €13 million call was launched to disseminate, replicate and upscale existing good practices at grassroots level. It attracted great interest from stakeholders with 35 projects selected.
• The “Online Linguistic Support for Refugees” initiativehelped more than 6,500 newly arrived refugees to improve their language skills.
• In the field of youth transnational partnerships, a quarter of the projects funded either directly involved migrants, refugees or asylum seekers or targeted their inclusion, citizenship, and the common values of freedom, tolerance and non-discrimination. On the whole, 34% of the Strategic Partnerships in the field of youth promoted social inclusion and solidarity.

eTwinning Plus made it possible to connect European schools with schools in Jordan, Lebanon and Morocco.

                                          

Did mobility increase in 2016?

Since 2014, the overall interest in mobility activities across all fields has been increasing by 10% per year. In 2016, 725,000 individuals and 79,000 organisations were funded by the Erasmus+ budget for mobility.

Nearly 3,900 higher education institutions were awarded mobility grants, representing a 4% increase compared to the 2015 call.

More than 100,000 young people were involved in the 2016 funded Youth Exchanges. That is 9% more than in 2015.

With just over 2 million mobilities supported in the three year period 2014-2016, the Erasmus+ programme is well on track to meet its target of supporting 3.7% of young people in the EU between 2014 and 2020 (i.e. around 3.3 million young people over the period).

What other projects related to education, training and youth received funding in 2016?

Erasmus+ also promotes cooperation for innovation and the exchange of good practices in the fields of education, training and youth, aimed at a long-lasting impact on organisations, individuals and policy systems:

• In 2016 Erasmus+ funded more than 2,300 Strategic Partnership projects involving 13,000 organisations across the education, training and youth sectors. The projects address innovative, quality and inclusive education, training and youth work in a digital environment; improving transversal competences across lifelong learning and the empowerment, participation and active citizenship of young people.
• Capacity building projects aim at the modernisation and internationalisation of higher education in partner countries[1], as well as cooperation and exchanges between partner and programme countries in the field of youth. In 2016 this action funded 147 higher education and 128 youth projects.
• The 20 Knowledge Alliance projects funded in 2016 brought together companies and higher education institutions for the development of entrepreneurial skills and competences in sectors such as the circular economy, open design and manufacturing, international security management, smart engineering, tourism and wine.
• The Sector Skills Alliances funded 15 vocational education and lifelong learning projects in the fields of manufacturing, the arts, entertainment and recreation, agriculture, forestry, fishing, construction, information and communication.

How does the programme support young people from disadvantaged backgrounds?

In 2016, the programme continued to fight barriers to mobility by becoming more inclusive for those from a disadvantaged background and those with special needs. In the first three years of Erasmus+ over 56,000 disadvantaged participants in higher education took part in mobility activities, including 1,682 with special needs.

Youth exchanges are a highly inclusive format for youth mobility, as 41% of the 104,000 participants in 2016 were young people with fewer opportunities.

More than 30% of the European Voluntary Service participants – their number rising for the first time above 10,000 volunteers – are young people with fewer opportunities.

In Capacity Building projects, special attention was given to the representation of least developed countries and the inclusion of people from disadvantaged socio-economic backgrounds and of those with special needs.

What developments were there in the sport sector?

In 2016, the sport chapter saw a €12 million budget increase (67%) compared to 2015. As a result more than three times as many projects received grants. In total 140 projects and 789 organisations benefitted from this action.

In 2016 Erasmus+ financed 63 collaborative partnership projects in the areas of social inclusion; and the integrity of sport. It also financed 18 not-for-profit European sport events. During the European Week of Sport, more than 15,000 events across Europe attracted approximately 10 million participants, twice as many as in the previous year.

How does the Commission support higher education in Partner Countries?

The international opening of Erasmus since 2015 has been a great success. With the International ‘Credit’ Mobility action of the Erasmus+ programme, over 26,000 grants were awarded in 2016 for short-term higher education mobility to/from Partner Countries around the world, with 55% going to students and the remaining 45% going to staff either teaching or in training. Some two-thirds of the grants were awarded to Partner Country nationals to come to Programme Countries. On average, students go abroad for five months at a total average cost of €4,400 each, while staff members go for an average of six days at an average cost of €1,800 each. Grants have so far been awarded to participants from 129 nationalities around the world, spanning five continents. Countries sending the most participants include Russia (which has its own budget) followed by Ukraine, Serbia, China and Morocco. More than half (54%) of the 26,000 participants are women.

Over €72 million was provided for the funding for 27 new Erasmus Mundus Joint Master Degrees. The consortia together include 150 partner universities.

147 new projects for Capacity-Building for higher education in 10 regions worldwide were funded with a budget of €131 million, involving 1,913 organisations around the world.

A total 269 modules, university chairs, networks, projects, centres of excellence and associations were supported by Jean Monnet activities in 2016 in 30 European Programme Countries and 45 countries inside and outside Europe.

                                         

What data is available on the Erasmus+ projects?

The statistical annex to the 2016 Erasmus+ report offers comprehensive information about the different Key Actions, and their budget and commitment profile, along with detailed information on the number of projects, participants and organisations. Data per country is also available for selected actions.

Qualitative information on the Erasmus+ projects is available through The Erasmus+ Project Results platform, a database giving free access to descriptions, results and contact information for all projects funded under the Erasmus+ programme in the field of education, training, youth and sport. Results can also be retrieved in excel format for further analysis.

For More Information

Press release

Erasmus+ Annual Report 2016

Erasmus + factsheet

Country-specific factsheets

Factsheet on the 30^th anniversary of Erasmus

Factsheets on the European education area

*The 33 Erasmus+ Programme Countries are the 28 EU Member States, Iceland, Liechtenstein, Norway, the former Yugoslav Republic of Macedonia and Turkey.

Partner countries are all other countries in the world.

The new rules aim to build trust between Member States so that they can exchange more information and boost cooperation between national tax authorities and law enforcement authorities.

The most cautious estimates show that VAT fraud can lead to lost revenues of over €50 billion a year for EU Member States – money that should be going towards public investment in hospitals, schools and roads. Revelations in the ‘Paradise Papers’ have again shown how tax avoidance schemes can be used to help wealthy individuals and companies to circumvent the EU’s VAT rules to avoid paying their fair share of tax. Recent reports also suggest that VAT fraud schemes can be used to finance criminal organisations, including terrorists.

Today’s proposals would enable Member States to exchange more relevant information and to cooperate more closely in the fight against these activities.

Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, said: “Cross-border VAT fraud is a major cause of revenue loss for Member States and EU budgets. Today’s proposal will help to strengthen the cooperation between institutions working nationally and at EU level in order to effectively tackle this problem and improve tax collection.“

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “The Paradise Papers have again shown how some are taking advantage of lax application of EU VAT rules to get away with paying less VAT than others. And we know that VAT fraud can be a source of financing for criminal acts, including terrorism. Combating this requires far more effective information-sharing than currently exists between the competent national authorities – and today’s proposals will make that happen. As an example, the EU’s network of anti-fraud experts Eurofisc will have access to car registration data from other Member States, helping to cut off one major source of VAT fraud linked to new vs used car sales.“

While the tax authorities of Member States already exchange some information on business and cross-border sales, this cooperation relies heavily on the manual processing of information. At the same time, VAT information and intelligence on organised gangs involved in the most serious cases of VAT fraud are not shared systematically with EU enforcement bodies. Finally, a lack of investigative coordination between tax administrations and law enforcement authorities at national and EU level mean that this fast-moving criminal activity is not currently tracked and tackled quickly enough.

Today’s proposals would strengthen cooperation between Member States, enabling them to tackle VAT fraud more quickly and more efficiently, including on fraud that takes place online. Taken together, the proposals would give a major boost to our ability to track and clamp down on fraudsters and criminals who steal tax revenues for their own gain.

Key measures in this legislation include:

• Strengthening cooperation between Member States: VAT fraud can happen in a matter of minutes, so Member States need to have the tools to act as quickly as possible. Today’s proposal would put in place an online system for information sharing within ‘Eurofisc’, the EU’s existing network of anti-fraud experts. The system would enable Member States to process, analyse and audit data on cross-border activity to make sure that risk can be assessed as quickly and accurately as possible. To boost the capacity of Member States to check cross-border supplies, joint audits would allow officials from two or more national tax authorities to form a single audit team to combat fraud – especially important for cases of fraud in the e-commerce sector. New powers would also be given to Eurofisc to coordinate cross-border investigations.
• Working with law enforcement bodies: The new measures would open new lines of communication and data exchange between tax authorities and European law enforcement bodies on cross-border activities suspected of leading to VAT fraud: OLAF, Europol and the newly created European Public Prosecutor Office (EPPO). Cooperation with European bodies would allow for the national information to be cross-checked with criminal records, databases and other information held by Europol and OLAF, in order to identify the real perpetrators of fraud and their networks.
• Sharing of key information on imports from outside the EU: Information sharing between tax and customs authorities would be further improved for certain customs procedures which are currently open to VAT fraud. Under a special procedure, goods that arrive from outside the EU with a final destination of one Member State can arrive into the EU via another Member State and transit onwards VAT-free. VAT is then only charged when the goods reach their final destination. This feature of the EU’s VAT system aims to facilitate trade for honest companies, but can be abused to divert goods to the black market and circumvent the payment of VAT altogether. Under the new rules information on incoming goods would be shared and cooperation strengthened between tax and customs authorities in all Member States.
• Information sharing on cars: Trading in cars is also sometimes subject to fraud due to the difference in how VAT is applied to new and used cars. Recent or new cars, for which the whole amount is taxable, can be sold as second-hand goods for which only the profit margin is subject to VAT. In order to tackle this type of fraud, Eurofisc officials would also be given access to car registration data from other Member States.

These legislative proposals will now be submitted to the European Parliament for consultation and to the Council for adoption.

Background

The proposed measures follow up on the ‘cornerstones’ for a new definitive single EU VAT area proposed in October 2017, and the VAT Action Plan towards a single EU VAT area presented in April 2016.

The common Value Added Tax (VAT) system plays an important role in Europe’s Single Market. VAT is a major and growing source of revenue in the EU, raising over €1 trillion in 2015, which corresponds to 7% of EU GDP. One of the EU’s own resources is also based on VAT.

Despite many reforms, the VAT system has been unable to keep pace with the challenges of today’s global, digital and mobile economy. The current VAT system dates from 1993 and was intended to be a transitional system. It is fragmented and overly complex for the growing number of businesses operating cross-border and leaves the door open to fraud: domestic and cross-border transactions are treated differently and goods or services can be bought free of VAT within the Single Market. The Commission has consistently pressed for the reform of the VAT system. For companies trading across the EU, borders are still a fact of daily life when it comes to VAT. Current VAT rules are one of the last areas of EU law not in line with the principles underpinning the Single Market.

For More Information

Q&A on the proposed tools to combat VAT fraud

Action Plan on VAT – Towards a single EU VAT area

Press release on reform of EU VAT rules

Q&A on reform of EU VAT rules

Factsheet on reform of EU VAT rules

Q&A on VAT for e-commerce

The Commission has repeatedly voiced concern at the level of VAT fraud currently taking place in the EU. Recent revelations of large-scale VAT evasion by wealthy individuals as part of the Paradise Papers and reports of how VAT fraud can result in tax revenues being spirited away to fund organised crime, including terrorist organisations, have also underlined the urgent need to tackle problems in this area.

Member States recently identified cross-border VAT fraud as one of their top ten priorities when it comes to the fight against organised and serious international crime. The most cautious estimates show that VAT fraud can lead to lost revenues of over €50 billion a year for Member States.

As part of the EU’s efforts to tackle VAT fraud once and for all, the Commission recently launched its plans for an EU-wide VAT area which will be fraud-proof and better for business, while bringing in much needed revenues for Member States. Member States have also already made efforts to tackle VAT fraud. But to complete the picture, EU countries need to cooperate more to investigate and crack down on instances of VAT fraud. They also need access to the most relevant and up-to-date information so that they can react speedily and effectively. Improving the cooperation between Member States’ tax authorities, other national law enforcement bodies and law enforcement authorities at EU level is the best way to reduce the damage made by criminals and to improve fairness of the taxation system in the short-term.

Today’s proposals were first announced in April 2016 as part of the Commission’s VAT Action Plan and formed part of the 20 measures to tackle the VAT gap. As part of the VAT Action Plan, the Commission committed to presenting a proposal to enhance VAT administrative cooperation and ‘Eurofisc’, the EU’s network of Member State VAT fraud experts. The measures announced today also respond to concerns raised by the European Court of Auditors in this area.

What are you proposing with today’s package of measures?

Today’s proposals will strengthen cooperation between Member States, enabling them to tackle VAT fraud more quickly and more efficiently. Taken together, the measures would give a major boost to our ability to track and clamp down on fraudsters and criminals who steal tax revenues for their own gain.

Key measures included in this legislation will lead to:

• Strengthening cooperation between Member States: VAT fraud can happen in a matter of minutes, meaning that Member States need to have the tools to act as quickly as possible. Today’s proposal would put in place an online system for information sharing within ‘Eurofisc’, the EU’s existing network of anti-fraud experts. The system would enable Member States to process, analyse and audit data on cross-border activity to make sure that risk can be assessed as quickly and accurately as possible. To boost the capacity of Member States to check cross-border supplies, joint audits would allow officials from two or more national tax authorities to form a single audit team to combat fraud – especially important for cases of fraud in the e-commerce sector. New powers would also be given to Eurofisc to coordinate cross-border investigations.
• Working with other law enforcement bodies: The new measures would open new lines of communication and data exchange between tax authorities and European law enforcement bodies on cross-border activities suspected of leading to VAT fraud: OLAF, Europol and the newly created European Public Prosecutor Office (EPPO). Cooperation with European bodies would allow for the national information to be cross-checked with criminal records, databases and other information held by Europol and OLAF, in order to identify the real perpetrators of fraud and their networks.
• Sharing of key information on imports from outside the EU and on vehicle registration: Information sharing between tax and customs authorities would be further improved for certain customs procedures which are currently open to VAT fraud. A special system that means that goods arriving from outside the EU with a final destination of one Member State can arrive in the EU in another Member State and transit onwards VAT-free. VAT is only charged when the goods reach their final destination. This feature of the EU’s VAT system aims to facilitate trade for honest companies, but can be abused to divert goods to the black market and circumvent the payment of VAT altogether. Under the new rules information on incoming goods would be shared and cooperation strengthened between tax and customs authorities in all Member States.
• Access to car registration data: Trading in cars is also sometimes subject to fraud due to the difference in how VAT is applied to new and used cars. Recent or new cars, for which the whole amount is taxable, can be sold as second-hand goods for which only the profit margin is subject to VAT. In order to tackle this type of fraud, Eurofisc officials would also be given access to car registration data from other Member States.

What is Eurofisc?

Eurofiscis a network of national EU Member State analysts working in different areas of fraud risk. It was set up in 2010 to improve the capacity of Member States to combat organised VAT fraud, especially carousel fraud. Managed by EU Member States, Eurofisc allows them to exchange early warnings on businesses suspected of being involved in carousel fraud. The European Commission contributes with administrative and logistical support without having access to operational data.

However, Eurofisc could be greatly strengthened and improved in order to better fight carousel fraud in particular. The speed at which information is exchanged must be improved, while information exchange needs to be more targeted: swift responses are key to fighting carousel fraud which can happen in the blink of an eye.

What information and data is currently shared between Member States and what needs to be improved?

While the tax authorities of Member States do already exchange some information on business and cross-border sales, this cooperation relies heavily on the manual processing of information. At the same time, VAT information and intelligence on organised gangs involved in the most serious VAT fraud are not shared systematically with EU enforcement bodies. Finally, a lack of investigative coordination between tax administrations and law enforcement authorities at national and EU level mean that this fast-moving criminal activity is not currently tackled quickly enough.

To combat the most serious cross-border fraud cases, national tax authorities exchange targeted information multilaterally within Eurofisc, a network of tax officials. Tax authorities can also carry out simultaneous controls in other Member States and arrange for tax officials from other Member States to be present in administrative offices and during administrative enquiries.

However, those instruments for administrative cooperation are not fit for purpose and need to be improved:

• The main mechanism for exchanging information is inefficient as it relies on manual collation and circulation of information which could easily be made automatically available. These practices generate complexity and delays and therefore decrease the value of the information exchanged, consuming the resources of tax administrations resources that could be freed up for other tasks;
• VAT information and intelligence on organised crime structures involved in serious VAT fraud is not currently shared between, on the one hand, tax administrations and Eurofisc, and on the other hand, other law enforcement authorities at national and EU level. A multidisciplinary approach involving both is critical to identify, prosecute and have a real impact on stopping the real perpetrators of crime, putting an end to serious VAT fraud;
• The way Eurofisc tax officials identify and exchange information and intelligence about risky traders and fraudulent networks is complex and causes delays. In addition, while Eurofisc tax officials are the first to be warned about new fraudulent networks and have strong expertise in serious VAT fraud, they play no role in the coordination of the subsequent audits;
• At the moment, tax officials cannot be directly involved in on-the-spot audits carried out by other tax administrations. That can generate delays and put a strain on the resources of the tax administrations where the business being audited is based.

What are the different kinds of VAT-related frauds that this proposal aims to tackle?

Today’s measures would vastly improve the current problems the EU faces with VAT fraud. The main issues are:

1. Missing trader fraud and carousel fraud

The problem:

VAT fraud can occur when a company that has collected VAT from its buyer and should pay this amount to the tax authority does not do so but instead disappears. The business owner simply vanishes with the money. Most fraud takes place when the company buys goods from another Member State, because purchasing the goods is VAT-free on cross-border transactions. When selling the goods on domestically, the company receives the entire amount of VAT, which it pockets. Because the company disappears, this type of fraud is called missing trader fraud.

Carousel fraud goes even further. In this case the same goods are bought and resold by the fraudster several times via middlemen. Each time the amount of collected VAT increases and the company either disappears or becomes insolvent before the tax authority can collect the accumulated VAT. With carousel fraud, the same product goes around several times before the fraudsters disappear.

The most damaging VAT fraud is committed by organised crime groups through VAT carousel fraud. Organised crime groups benefit from their international criminal structures and connections to establish efficient cross-border VAT fraud schemes to extort money from national budgets.

The European Court of Auditors and Europol estimate that organised crime groups cause €40-60 billion of the annual EU-wide VAT revenue losses and that 2% of those groups are behind 80% of the carousel fraud. Proceeds of VAT carousel fraud are usually reinvested in new criminal activities or laundered.

The fix:

The measures announced today would have a profound effect on how Member States exchange information around cross-border VAT fraud in the EU, allowing them to consolidate information on the businesses taking part in this activity in different countries and to investigate suspicious activity more easily. Once agreed, the rules would put in place a mechanism by which Member States would be able to jointly process and analyse data on VAT fraud via the Eurofisc network of Member State experts. At the same time, Member States would be able to jointly audit and assess companies operating cross-border where there is reason to believe that fraudulent activity is taking place. EU countries would also be able to send officials abroad to assess cases of VAT fraud in other Member States where their country has been losing out on tax revenues.

2. Clamping down on VAT fraud arising from imports from outside the EU

The problem:

Goods that arrive from outside the EU with a final destination of one Member State can arrive in the EU via another Member State and transit onwards VAT-free (under the so-called customs procedures 42 and 63). VAT is only charged when the goods reach their final destination. This feature of the EU’s VAT system aims to facilitate trade for honest companies, but can be used by criminals to divert goods to the black market and circumvent the payment of VAT altogether. In practice these procedures are often abused with a combination of tricks such as under-evaluation of the value of imported goods to evade customs duties.

Currently, tax authorities have difficulty detecting such fraud on time. This is further exacerbated by the fact that Member States of import and of destination have to wait for the importer’s paperwork (or ‘recapitulative statement’) to arrive before carrying out checks. Often the importer fails to send this statement. The entire process can be cumbersome and lengthy, while fraud can occur very quickly.

The fix:

For the first time, tax authorities will share information on imported goods from outside the EU that make use of customs procedures 42 and 63 leading to VAT fraud. The relevant information about the imported goods (e.g. VAT numbers, value of the imported goods, type of commodities etc.) already submitted electronically with customs declarations, will be shared by the Member State of import with the tax authorities in the Member State of destination.

The tax authorities in both countries would therefore be able to cross-check this information with the information reported by the importer and by the recipient in his VAT return.

The measure proposed will allow:

• the Member State of destination to inform the Member State of import if the VAT number of the customer, albeit valid, had been used by the importer without their knowledge;
• the tax authorities to cross-check the customs information with the VAT recapitulative statements and to detect undervaluation at the moment of import, designed to avoid customs duties;
• automated access to the VAT Information Exchange System (VIES) by customs authorities responsible for checking the conditions for the VAT exemption in customs procedures 42 and 63.

3. VAT fraud in the sale of second-hand cars

The problem:

Trading in cars is also sometimes subject to fraud due to the difference in how VAT is applied to new and used cars. Recent or new cars, for which the whole amount is taxable, can be sold as second-hand goods for which only the profit margin is subject to VAT. The cars can then be sold on without the VAT being paid on the whole price to the tax administrations in other Member States. This kind of fraud has been taking place for years and has now profoundly altered the level playing field between honest businesses and fraudsters in this sector.

The fix:

Tax authorities will be given access to information held in car registration databases so that fraud in the second-hand car market can be identified and acted upon as quickly as possible. Currently, Member States face difficulties when they have suspicions about specific vehicles and they do not know which Member State should be made aware. This may delay action, hampering the ability of the Member State receiving the car to react quickly.

The Commission proposes to improve access to vehicle registration data by allowing Member States to have access to car registration data in other Member States through EUCARIS, the existing the European vehicle and driving licence information system. This would increase administration capacities to react to fraud on cars and allow quick reaction when that fraud is flagged to enforcement agencies.

How will the proposal change the way EU agencies such as Europol and OLAF work together to crack down on fraud? What role will the EPPO play?

The proposal involves a much more integrated and intertwined anti-VAT fraud system in the EU with clearer and more direct links between tax authorities, law enforcement and intelligence agencies. Europol and OLAF are the two bodies that are at the forefront of the fight against fraud at EU level. A direct link between Eurofisc, Europol and OLAF as well as with the EPPO for the most serious VAT fraud cases, would maximise the value of the information in the fight against criminal organisations.

The proposal will also develop the exchange of information and intelligence between Member States tax administrations in Eurofisc and law enforcement authorities at the EU level:

• Member States (via Eurofisc) would be able to exchange information and intelligence with OLAF and Europol to allow those agencies to cross-check the information with their own data. This would help to identify the criminals behind the schemes and their business partners in the EU. Europol would then be able to share the information with national law enforcement authorities leading to more action against VAT fraud suspects. OLAF would be able to coordinate investigations at national level.
• Member States would be obliged to spontaneously send information on VAT fraud cases involving at least two Member States connected to cross-border VAT fraud above €10 million to the EPPO for appropriate follow-up.       

Will personal data of businesses and consumers be recorded and exchanged?

Today’s proposal would trigger new exchange and joint processing of existing VAT information, which could include personal data. However, data collection would be strictly targeted and circumscribed to operators supposedly involved in fraudulent transactions. The data would be kept only for the time necessary for analysis and investigation by national tax authorities empowered to enforce VAT obligations. They would be used solely to identify potential fraudsters at an early stage and to put an end to fraudulent networks whose purpose is to abuse the VAT system by perpetrating VAT fraud. They would be accessed and used by authorised personnel alone.

Nevertheless, these measures would ultimately be subject to Article 8 of the Charter of Fundamental Rights and the existing General Data Protection Regulation will be respected.

Who did you consult for this proposal and what are the next steps?

In 2016, the Commission announced its intention to propose a definitive VAT system in order to create a robust single European VAT area. Among the short-term measures, the Commission announced that it would seek to improve the exchange and analysis of information by tax administrations and with other law enforcement bodies, to strengthen Eurofisc and to introduce new tools such as joint audits.

In their conclusions of May 2016 on fighting VAT fraud, Member States acknowledged that improving administrative cooperation between tax authorities was of significant importance. The Council also called on the Commission to propose ways of addressing legal obstacles and practical limitations in the EU and within the Member States that are holding back a qualitative leap in information exchange. In November 2016, the European Parliament welcomed the VAT Action Plan and supported its measures to reduce the VAT gap and tackle VAT fraud in its resolution.

In spring 2017 the European Commission consulted the general public in drawing up the current proposal. The Commission also sought the opinion of the tax authorities in the Member States.

These legislative proposals will now be submitted to the European Parliament for consultation and to the Council for adoption.

When will the proposals enter into force?

The measures will enter into force as soon as they are agreed by the Member States and the European Parliament has given its opinion. However, as the implementation of the automated access to the information collated by the customs authorities and to vehicle registration data will require new technological developments, their application will be deferred until 1 January 2020 to allow the Member States and the Commission to carry out those developments.

For More Information

Press release on the proposed tools to combat VAT fraud

Action Plan on VAT – Towards a single EU VAT area

Press release on reform of EU VAT rules

Q&A on reform of EU VAT rules

Factsheet on reform of EU VAT rules

Q&A on VAT for e-commerce