European Court of Auditors reports says that incorrect levels of VAT are paid on goods imported into the EU. The European Court of Auditors (ECA) said that member states are failing to ensure that the correct level of value-added tax (VAT) is being paid on goods imported into the EU and transported across borders inside the Union. A special report released by the ECA on 13 December has looked into a customs procedure - number 42 - that is used to provide importers an exemption from VAT on goods that are being sold in another EU member state.
The report says that controls in member states on ensuring that VAT was paid were deficient and that member states did not ensure that the conditions for exemption were being met.
The ECA carried out an audit in seven member states where goods were being imported and asked 21 member states that were the destination of goods to make sample checks of whether VAT was being paid.
The report says that the incorrect application of the procedure has led to "significant losses to national budgets". It says that the losses, extrapolated from the samples, was €2.2 billion in 2009. This represents 29% of all the VAT payable in imports made under the customs procedure in 2009, the ECA says.
The report says that member states have made some improvements to their controls but that more work is needed. It said that information about transactions using the procedure was not always given to tax authorities in the destination member states.
The ECA recommends include making importers liable for VAT losses in cases where the VAT statement is not submitted, creating a common risk profile for imports using procedure 42, and changing legislation to improve the exchange of information with authorities in the destination member state.