TEI urges member states to reject requests for a generalised reverse charge mechanism pilot program.

• Author: Regales, Paula
• Position: European Union, Czech Republic, Austria

On May 24, 2016, 2016, TEI submitted a letter to European Union Member States urging them to reject the Czech Republic and Austria's request for permission to introduce a pilot program implementing a generalised reverse charge mechanism. TEI acknowledged the existence and importance of the VAT gap and fraud schemes the proposed pilot is intended to address. However, TEI maintained a generalised reverse charge mechanism would not stem such fraud and instead would create opportunities for new types of fraud, further disharmonize the European Union's VAT system, and add to the already onerous compliance costs and risks for legitimate businesses. TEI thus urged Member States to instead develop alternate means to address VAT fraud and to direct efforts toward establishing a single EU VAT area, as outlined in the Communication from the European Commission to the European Parliament, the Council and the European Economic and Social Committee on an Action Plan on VAT. TEI's letter was prepared under the aegis of TEI's European Indirect Tax Committee, whose chair is Paula Regales. Pilar Mata, TEI Tax Counsel, coordinated the preparation of TEI's letter.

As president of Tax Executives Institute (TEI), I write in response to the recent request from the Czech Republic and Austria for permission to introduce a pilot program implementing a generalised reverse charge mechanism. TEI acknowledges the existence and importance of the VAT gap and fraud schemes the proposed pilot is intended to address. However, TEI maintains a generalised reverse charge mechanism would not stem such fraud and instead would create opportunities for new types of fraud, further disharmonize the European Unions (EU) VAT system, and add to the already onerous compliance costs and risks for legitimate businesses. TEI thus urges Member States to reject requests for a generalised domestic reverse charge mechanism and to instead develop alternate means to address VAT fraud and to direct efforts toward establishing a single EU VAT area, as outlined in the Communication from the European Commission (Commission) to the European Parliament, the Council and the European Economic and Social Committee on an Action Plan on VAT (Action Plan on VAT). (1)

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