Menu
Tax Notes logo

VAT and Administrative Cooperation in the EU

View as PDF
Posted on Oct. 23, 2020
Giorgio Beretta
Giorgio Beretta

Giorgio Beretta is a VAT adviser at PwC TLS — Avvocati e Commercialisti in Milan. He is also an editor responsible for VAT and indirect taxes at the Kluwer International Tax Blog and at Highlights & Insights on European Taxation, as well as a literature review editor for Intertax.

The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of any organizations with which he is affiliated.

In this article, the author examines the history of administrative cooperation in the field of VAT in the EU, considers the problems in the existing system, including its separation from cooperation in the field of direct taxation, and suggests improvements.

On July 15 the European Commission delivered a communication titled “An Action Plan for Fair and Simple Taxation Supporting the Recovery Strategy” (COM(2020) 312 final). In the communication, the commission commits to a series of 25 actions to make taxation simpler, fairer, and more attuned to the modern economy in the coming years. At a time when the EU and the global community as a whole are working to recover from the economic fallout of the
COVID-19 crisis, the European Commission suggests that a fair, efficient, and sustainable tax system is pivotal to supporting a transition to a greener and more digital world that is aligned with the principles of the EU’s social market economy. Among other goals, tax proceeds are needed to support the European Green Deal and the European Digital Strategy.

Several of the action items in the ambitious plan — which the European Commission endeavors to implement by the end of 2024 — relate to VAT, including initiatives involving administrative cooperation. The EU has made several improvements in VAT administrative cooperation in recent years in accordance with the European Commission’s 2016 action plan on VAT (COM(2016) 148 final),1 a trend that should grow with the VAT e-commerce package, which will take effect July 1, 2021 (postponed from January 1, 2021, because of COVID-19). Despite undeniable leaps forward, the European Commission itself estimated that the VAT gap stood at €140 billion in 2018.2 Administrative cooperation is critical here — it plays a fundamental role in the fight against tax fraud, tax evasion, and tax avoidance.

In July’s action plan, the European Commission commits to taking various steps to streamline the exchange of information, verification procedures, and audit controls regarding VAT through the cooperation by EU member states’ tax authorities. One proposal relates to establishing Eurofisc as a portal for tax administrations and other public authorities to allow them process and analyze data at the EU level. Thus, verification procedures that are spread across member states can be undertaken inside Eurofisc, a single organization. The European Commission also plans to reinforce routine checks on cross-border transactions by moving from manual to automated exchange of electronic data. Improving cross-border investigations and joint audits is another goal. However, perhaps the most significant commitment is the commission’s effort to negotiate administrative cooperation agreements involving VAT with relevant third countries based on the existing agreement with Norway — the only such agreement the EU has concluded with a third country.3

This article traces the historical development of administrative cooperation on VAT in the EU, analyzes its main drawbacks and hindrances, and suggests ways to improve it.

I. Historical Background

Administrative cooperation involves tax administrations from different countries working together to exchange information, monitor the application of tax rules, and secure amounts due. Close cooperation among administrative bodies in different countries is vital to detect and reduce tax fraud, tax evasion, and tax avoidance in the EU, especially when an activity is carried out in the territory of one member state but VAT is due in a different member state.4

The origins of administrative cooperation between tax authorities in the EU date back to the late 1970s, with Council Directive 77/799/EEC concerning mutual assistance by the competent authorities of the member states in the field of direct taxation serving as the cornerstone. The scope of that directive was extended to VAT by Council Directive 79/1070/EEC, which provides mutual assistance in the exchange of information for the proper assessment of VAT, and by Council Directive 79/1071/EEC, which provides mutual assistance for the recovery of VAT. Both of those directives entered into force on January 1, 1981. On January 27, 1992, the Council of the European Communities (the predecessor to the EU Council) adopted Regulation (EEC) No. 218/92, introducing the VAT information exchange system. But on October 7, 2003, the EU Council repealed that regulation and adopted Regulation (EC) No. 1798/2003 on administrative cooperation in VAT. On the same date, the council adopted Directive 2003/93/EC, removing VAT from the scope of Directive 77/799/EEC.

The legal instrument that governs VAT administrative cooperation in the EU today is Regulation (EU) No. 904/2010 of October 7, 2010, on administrative cooperation and combating fraud in the field of VAT. That regulation recast Regulation (EC) No. 1798/2003, essentially maintaining the structure of its predecessor while also introducing some new measures aimed at improving the exchange of information between member states. The EU Council has updated the regulation a few times, including Regulation (EU) No. 517/2013, Regulation (EU) No. 2018/1541, and Regulation (EU) No. 2018/1909. Set to take effect January 1, 2024, the most recent amendment, Regulation (EU) No. 2020/283, creates a central electronic system of payment information to help detect VAT fraud and improve investigations into suspected VAT fraud.5

Since Directive 2003/93/EC separated administrative cooperation in the field of VAT from cooperation involving direct taxation, the latter has followed its own evolutionary path. In 2011 Council Directive 2011/16/EU on administrative cooperation (DAC or DAC1) replaced the mutual assistance framework from 1977 and introduced, inter alia, a new standard for the mandatory and automatic exchange of information. Between 2014 and 2019, the member states adopted five amendments to DAC1. It now covers:

Finally, after taking stock of a similar work pattern at the OECD level,6 on July 15 the European Commission tabled a proposal for a new directive (COM(2020) 314 final), an amendment to Directive 2011/16/EU that would introduce tax information reporting obligations for platform operators (DAC7).

Notably, a different legal instrument — Council Regulation (EU) No. 389/2012 — governs administrative cooperation regarding excise duties for the EU.

History shows that a variety of legal instruments have addressed administrative cooperation among the tax authorities of different EU member states through the years. Indeed, at times two different legal bases have coexisted for administrative cooperation on VAT. Between 1992 and 2003, both Council Directive 77/799/EEC and Regulation (EEC) No. 218/92 provided standards for administrative cooperation in the field of VAT, but they had different operating rules. The 1977 directive had a wide scope of application that reached all VAT matters, while the 1992 regulation applied only to the intra-Community supply and acquisitions of goods.

As the European Commission itself acknowledged, the existence of two legal bases for VAT administrative cooperation in the EU caused “needless complexity with extremely adverse effects.”7 The lack of synergy between the two instruments was evident from the fact that EU member states had different offices to handle the exchange of information under the directive and under the regulation. Thus, it came as no surprise that the two legal bases for VAT administrative cooperation were eventually reconnected by Regulation (EC) No. 1798/2003.

II. Council Regulation (EU) No. 904/2010

The regulatory framework for administrative cooperation on VAT in force today is set out in Regulation (EU) No. 904/2010.8

Chapter 1 of the regulation contains general provisions and relevant definitions. It also establishes that EU member states have a duty to cooperate with each other to protect VAT revenues in all EU countries.

Chapter 2 of the regulation provides for different types of cooperation similar to those defined by the OECD.9 The exchange of information can either occur on request (article 7), automatically (articles 13 and 14), or spontaneously (article 15). More specifically, article 13 of the regulation provides that EU member states must automatically exchange information in the following situations, inter alia:

  • when taxation is deemed to take place in the EU member state of destination and the effectiveness of the control system depends on information provided by the EU member state of origin, such as may occur with distance sales that are not taxed in the state of origin;

  • when one state suspects that fraud may have occurred in the other EU member state, such as may occur with irregular intra-EU supplies and acquisitions; or

  • when there is a risk of lost tax revenue in the other EU member state, a situation that may arise in connection with fraudulent schemes related to VAT refunds.

However, an EU member state may abstain from taking part in the automatic exchange of information if collecting information for that exchange would require imposing new obligations on those liable for VAT or, alternatively, if the exchange would impose a disproportionate administrative burden on the requested authority (article 54(1)(a)). As paragraph 6 in the introductory portion of the regulation (the whereas clause) states, “administrative cooperation should not lead to an undue shift of administrative burdens between Member States.” Other safeguards exist to protect information involving a disclosure of a commercial, industrial, or professional secret, or of a commercial process (article 54(4)). Notably, however, paragraph 21 of the whereas clause states: “National rules on banking secrecy should not stand in the way of the application of this Regulation.”

Regulation No. 904/2010 also contains rules defining the cases in which tax authorities may not refuse to reply to a request for an administrative inquiry. In accordance with article 7(4a) — a provision introduced by Regulation (EU) 2018/1541 — when at least two EU member states agree that an administrative inquiry is necessary into the amounts declared by a person that is taxable but not established in the requesting state, then the EU member state where the taxable person is established should undertake the inquiry unless specific exceptions apply. Exceptions include when the inquiry is contrary to the laws or administrative practices of the requested EU member state, or when the inquiry would lead to the disclosure of a commercial, industrial, or professional secret or commercial process.

The regulation also contains other relevant rules, such as:

  • time limits and conditions for the exchange of information (articles 10 to 12);

  • the opportunity to request feedback on information provided (article 16);

  • detailed procedures for storing, accessing, and checking the accuracy of exchanged information (articles 17 to 24);

  • rules governing requests for administrative notification (articles 25 to 27);

  • procedures allowing tax officials from the one member state to be present in the territory of another EU member state during administrative inquiries carried out jointly (article 28);

  • the option to conduct simultaneous controls (articles 29 and 30); and

  • rules regarding the means, language, limits, and safeguards for the exchange of information (articles 51 to 57).

Another important element of the regulation is the establishment in 2010 of Eurofisc — a network for the swift exchange, processing, and analysis of targeted information on cross-border fraud between EU member states, including the coordination of any follow-up actions (articles 33 to 37).

The regulation also provides that the arrangements and measures for administrative cooperation are subject to constant monitoring by the European Commission and also by EU member states (articles 49 and 59).

III. VAT Cooperation and Member States

Administrative cooperation plays a fundamental role within the current VAT system. In fact, the electronic storage and transmission of data using standard forms and within prescribed time limits coupled with the possibility of simultaneous controls and the presence of officials from one EU member state in the territory of another EU member state are indispensable elements for the proper functioning of the VAT system. These fundamental pieces of the system help tax administrations with a range of tasks, including identifying suppliers, verifying the taxable status of customers, monitoring the volume of supplies and a supplier’s turnover, and ensuring that the proper amount of tax is charged.

One example of the fundamental benefits of VAT administrative cooperation involves intra-Community cross-border business-to-consumer supplies when the place of supply is the member state of destination. In this case, the member state of destination must essentially rely on the willingness of a non-established supplier to comply with its own VAT obligations. In fact, if the supplier does not register, declare, and pay VAT in the member state of consumption, the tax authorities of that state will not even know that there is a taxable supply for VAT purposes or where the supplier is established.

Moreover, as of January 1, 2019, for telecommunications, broadcasting, and electronically supplied services, and starting on July 1, 2021, for distance sales of goods, the VAT of the member state where the supplier is established or where the goods are located when dispatch to the customer begins applies to cross-border supplies if the supplier does not exceed an EU-wide threshold of €10,000 during the present or immediately preceding calendar year. In this context, information from all of the EU member states in which the supplier makes supplies is key to monitoring whether the threshold is exceeded.

The exchange of information is also instrumental when a taxable person, in accordance with Council Directive 2008/9/EC, seeks a refund from a state in which it is not established because the exchange allows the member state to confirm the applicant’s relevant data.

The prevention of disputes is another benefit of administrative cooperation, especially when the disputes arise because of incorrect information or because a tax administration lacks any relevant information.

The factual background of a recent decision from the Court of Justice of the European Union is a case in point. In KrakVet Marek Batko,10 Hungarian tax authorities made inquiries to the Polish tax authorities regarding distance sales, inter alia. However, the exchange of information has its limits. Notably, it cannot be used to resolve a question about the nature of a supply when the tax authorities of different EU member states disagree — potentially giving rise to double taxation or nontaxation — and, as the KrakVet Marek Batko decision notes, the exchange of information rules do not require the states to reach an agreement.

Administrative cooperation can also provide procedural safeguards that are binding on tax authorities of EU member states, such as the statutory time limits for completing a tax audit, which are the subject matter of a recent referral to the CJEU.11

In a 2019 report, the European Court of Auditors highlighted a number of problems in the EU’s system for VAT administrative cooperation. Notably, the report found that the use of exchange of information between EU member states is insufficient, multilateral controls are ineffective, EU member states do not find the exchange of information through Eurofisc useful, tax authorities do not perform effective audits on intra-EU distance sales of goods, and that the mutual assistance provisions for recovery of taxes are underused.12

Other reviews have expressed concerns about the relationship between the separate administrative cooperation systems for direct taxes and VAT in the EU. Notably, in its 2019 assessment of Directive 2011/16/EU (SWD(2019) 327 final) the European Commission submitted that “despite some differences, the Directive is overall coherent with similar provisions in the area of VAT.” More specifically, the commission observed:

The two pieces of legislation share the same objectives (proper functioning of the Single Market; protection of tax revenues and fight against tax frauds; contribution to the fairness of the tax system), the institutional framework (in 14 Member States the central liaison office is in charge of administrative cooperation both for direct taxation and VAT matters), and the information communication system (CCN network). The tools placed at the disposal of the national tax authorities by the two acts are also similar (exchanges on request, without prior request, automatic exchanges etc.).

Further, article 55(1) of Regulation (EU) No. 904/2010 provides that information exchanged under the regulation “may also be used for the assessment of other levies, duties, and taxes” — specifically referencing taxes covered by Council Directive 2010/24/EU of March 16, 2010, concerning mutual assistance for the recovery of claims relating to taxes, duties, and other measures — and “it may be used in connection with judicial proceedings that may involve penalties, initiated as a result of infringements of tax law.”

However, the European Commission has also pointed out some differences between the two regimes for administrative tax cooperation. The 2019 assessment highlights the fact that “Eurofisc, a forum for enhanced tax control cooperation set under the VAT administrative cooperation framework, does not cover direct taxes” and also that “administrative enquiries carried out jointly in the field of VAT are in some cases mandatory (in other words, Member States have to take part to them),” while that is not the case for administrative cooperation in the field of direct taxation. The European Commission further notes that “other differences concern the choice of the legal instrument (Regulation vs Directive) and the different use of automatic exchanges (widespread in direct taxes, residual in VAT).” Despite these points of divergence the European Commission finds that:

The similarities in the approach, the objectives, and the available tools prevail over the differences, so that the two acts present limited and very specific problems of coherence, and rather create a number of synergies at the institutional and technical levels. To conclude, the two acts are coherent, and only a limited number of problems emerge in their daily operation (differences in administrative enquiries, differences in the deadline for exchanges on request, forwarding information to another Member State).

IV. VAT Cooperation and Third Countries

In a globalizing world and with more jurisdictions embracing a VAT or other goods and services tax, administrative cooperation in the field of VAT has become increasingly important. It cannot be denied that as “the world is getting smaller, the VAT implications are getting bigger.”13

Unfortunately, the only legal instrument dedicated to VAT administrative cooperation between EU member states and third countries is the agreement between the EU and Norway, which took effect September 1, 2018. The agreement is quite similar to Regulation (EU) No. 904/2010 and includes all the tools for administrative cooperation contained therein with except for joint audits. It also replicates the provisions of Council Directive 2010/24/EU regarding mutual assistance for the recovery of claims, and it includes requests for recovery and precautionary measures. Under the agreement, Norway is even allowed to participate in Eurofisc. Notably, the VAT-related information may eventually be used in the assessment and recovery of other taxes.14

When considering VAT administrative cooperation between EU member states and third countries, it is important to note that article 50 of Regulation (EU) No. 904/2010 provides that information received from third countries can be shared with other EU member states and, similarly, an EU member state can share information obtained from another member state with a third country to the extent permitted by the assistance arrangements in place with, respectively, the third country or the EU member state from which the information was obtained.

VAT administrative cooperation agreements between EU member states and third countries might have an impact beyond the exchange of information itself. For instance, the Italian Revenue Agency recently explained that — as a result of the agreement between Norway and all EU member states — Norwegian taxable persons should be allowed to register for VAT purposes in Italy without appointing a fiscal representative therein.15

Although not specifically designed for VAT, EU member states might rely on other legal instruments for the exchange of tax information. One important instrument in this regard is the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which was developed jointly by the OECD and the Council of Europe in 1988 and amended by a protocol signed in 2010. While general consumption taxes such as VAT are covered by the convention, countries signing the convention may exclude general sales taxes from the scope of the convention in accordance with its article 30, but no EU member state has taken that step.

Other relevant instruments — although they are bilateral, not multilateral — include the OECD model tax convention, which deals with exchange of information in article 26,16 and the Model Agreement on Exchange of Information on Tax Matters. Both models apply to “taxes of every kind and description”17 and therefore can be relied upon for exchanging VAT-relevant information insofar as an EU member state has concluded an agreement based on those models with a third country.18

Importantly, all these instruments may be used concurrently with VAT-specific exchange of information instruments.19 Eventually, exchange of information agreements from other fields of law may also be used for VAT purposes in some situations — for example, under the anti-money-laundering and terrorist financing directive (Directive (EU) 2015/849) or the European Convention on Mutual Assistance in Criminal Matters.20

Despite the wealth of instruments at the disposal of EU member states, the European Court of Auditors’ 2019 report found that administrative cooperation arrangements between EU member states and third countries are not being fully exploited.21 This despite a 2015 report from the same group urging member states to “authorize the Commission to negotiate mutual assistance arrangements with the countries where most of the digital service providers are established and sign these arrangements.”22

V. Conclusion

Since the passage of the first administrative cooperation directive in 1977, the EU and the larger world have seen an unprecedented move toward international cooperation in tax matters.23 This shift has changed the structure of global governance, which some suggest is evolving into a custom-based system of cooperation in which soft law instruments and peer review mechanisms play a key role.24

Despite largely following the same evolutionary trajectory, the policies governing administrative cooperation in the field of VAT remain completely detached from the analogous rules regarding direct taxation. A comprehensive system for global tax governance through international cooperation also seems to remain more elusive for VAT compared with the accomplishments in the direct tax arena. It is striking that even within a single legal framework such as that uniting the EU member states, administrative cooperation for direct taxation and VAT remain completely independent systems with different legal instruments governing the two arenas, even though the conditions and tools used in the two systems are quite similar.

This is particularly surprising because the roots of administrative cooperation in the EU are found in Directive 77/799/EEC — a single instrument that ultimately provided a cooperation framework for both direct taxes and VAT. Tellingly, when extending the administrative cooperation framework for direct taxes to VAT, Directive 79/1070/EEC stipulated:

Whereas the provisions of Directive 77/799/EEC are also suitable for value added tax, subject to certain amendments and additions; whereas it is therefore sufficient to extend the scope of the said Directive.

More than 40 years later — and more than 15 years since Directive 2003/93/EC eliminated the unified system of administrative tax cooperation — the EU Council, in a report discussing the future of the system, specifically stipulated that it:

BELIEVES that, while Council Regulation (EU) No 904/2010 and Directive 2011/16/EU now create a number of synergies at institutional and technical levels, further points of convergence could be sought between those legislative instruments, and INVITES the European Commission to analyse, with due consideration to the differences and specific challenges in the field of direct taxation, whether and to what extent it would be feasible, beneficial and suitable to further align the scope of tools available for tax authorities under Council Directive 2011/16/EU with specific provisions of Council Regulation (EU) No 904/2010, where further convergence would result in the increased efficiency of the tax authorities of the Member States.25

In the same document, the EU Council also highlights:

the importance of an effective and coherent EU regulatory framework and of aligning Directive 2011/16/EU and Council Implementing Regulation 282/2011/EU where appropriate in order to increase efficiency, utility and cost-effectiveness by making use of data that are already available with due consideration to the differences and specific challenges in the field of direct taxation.

Arguably, a single legal framework for exchanging tax information could help shape a shared understanding of the relevant facts of a case that tax authorities could use for future tax procedures, whether they involve direct taxes, VAT, or other levies.

And yet, despite the strong arguments for enhanced unity, joint audits involving administrative cooperation in the fields of direct taxes and VAT may begin to look increasingly different in the near future. DAC7 proposes a new article 12a(7) for Directive 2011/16/EU stating that the conclusions of a joint audit by tax authorities of different EU member states “shall be incorporated in a final report which shall have equivalent legal value to the relevant national instruments issued following an audit” and obligating the competent authorities of participating EU member states “to agree on the facts and circumstances of the case.” While that rule would apply to direct taxation, in the field of VAT, article 28(2a), fifth indent of Regulation No. 904/2010, provides that only “by agreement between the requesting authorities and the requested authority . . . the participating authorities may draft a common enquiry report,” suggesting that a typical administrative cooperation procedure involving VAT would not be able to prevent multiple VAT assessments.26

Also, in the direct taxation arena, DAC7 will enable the tax authorities of an EU member state to file group requests for information to tax authorities of another EU member state — that is, requests that relate to a group of taxpayers that cannot be individually identified but are instead described by a set of shared characteristics.

Moreover, after the approval of DAC7, an EU member state will be able to ask the European Commission for a suspension of the exchange of information if a data breach has occurred. This would be in addition to the measures required under the general data protection regulation (Regulation (EU) 2016/679) to address the data breach.

This author submits that possibilities analogous to those discussed above should also be extended to administrative cooperation in the field of VAT.

It is equally important to pool data into a single EU database and share tax information between tax authorities of the EU member states. This would make information easily accessible and make EU member states less dependent on each other for information. It would also allow the EU to use technology to perform controls and link data from various resources, entered at various times, and covering various situations.27 Duplicative recording and reporting of information could be avoided by introducing a provision similar to article 7(4)(c) of Regulation No. 904/2010, which provides that a request to exchange information can be refused if the requested authority has already provided the requesting authority with information on the same taxable person as part of an administrative inquiry that was held within the past two years.

Securing administrative cooperation with relevant third countries — as outlined above and in keeping with the European Commission’s intention as expressed in its communication delivered on July 15, 2020 — has also become increasingly important.

Ultimately, this author believes that the need to constantly update the instruments for administrative cooperation is evidence that the EU has put too many different mechanisms at the disposal of competent authorities, a situation that could generate inefficiency. Thus, the author submits that the EU should review its administrative tax cooperation system and adopt a broader mechanism that would incorporate both direct taxes and VAT. The EU should also consider trying to fill the existing gaps and create instruments to govern VAT administrative cooperation between EU member states and third countries.

FOOTNOTES

1 This plan underlines a “need to move from the existing cooperation models based on Member States exchanging information to new models of sharing and jointly analysing information and acting together” and suggests that “Member States should benefit from a risk management capacity at EU level, enabling them to rapidly and more effectively identify and dismantle fraudulent networks.”

2 Center for Social and Economic Research, “Study and Reports on the VAT Gap in the EU-28 Member States: 2020 Final Report” (Sept. 10, 2020).

4 In those situations, discrepancies exist between substantive and enforcement jurisdiction. See Walter Hellerstein, “Jurisdiction to Tax Income and Consumption in the New Economy: A Theoretical and Comparative Perspective,” 38(1) Ga. L. Rev. 1 (2003).

5 For an illustration of the new system, see Mariken van Hilten and Giorgio Beretta, “The New VAT Record Keeping and Reporting Obligations for Payment Service Providers,” 31(4) Int’l VAT Monitor 169 (2020).

7 Commission of the European Communities, Proposal for a Directive of the European Parliament and of the Council Amending Council Directive 77/799/EEC Concerning Mutual Assistance by the Competent Authorities of the Member States in the Field of Direct and Indirect Taxation, COM(2001) 294 final (June 18, 2001).

8 For a more in-depth illustration of the regulation, see Marius Vascega and Servaas van Thiel, “Assessment of Taxes in Cross-Border Situations: The New EU Directive on Administrative Cooperation in the Field of Taxation,” 20(3) EC Tax Rev. 148 (2011).

10 KrakVet Marek Batko sp. K. v. Hungary, C-276/18 (CJEU 2020).

11 HYDINA SK s.r.o. v. Slovakia, C-186/20.

12 European Court of Auditors, “E-Commerce: Many of the Challenges of Collecting VAT and Customs Duties Remain to Be Resolved,” Special Report No. 12 (July 16, 2019).

13 Nils Eriksen and Kelvin Hulsebos, “Electronic Commerce and VAT — An Odyssey Towards 2001,” 11(4) Int’l VAT Monitor 137 (2000).

14 See, e.g., Ilse De Troyer, “The New European Union-Norway Agreement on Administrative Cooperation in the Field of VAT and Other Taxes,” 58(11) Eur. Tax’n 536 (2018) (suggesting that “the international fight against VAT — and other forms of tax — fraud would benefit from cooperation on a broader scale, with other relevant third countries” and that the agreement between the EU and Norway “sets an important example for further international cooperation in this area”).

15 Italian Revenue Agency, Resolution No. 44/E of July 28, 2020.

16 The exchange of information is neither limited to information relating to the affairs of residents of the contracting parties nor to the taxes covered by the convention. The only requirement is some connection with the recipient state (for example, information regarding activities of the third-country resident person conducted in the other contracting state). Notably, the extension of exchange of information to “taxes of every kind and description” was made during the 2000 update of the OECD model. See, e.g., Ana Paula Dourado and Johannes Becker, “Article 26: Exchange of Information,” in Klaus Vogel on Double Taxation Conventions (2015).

17 This wording is from the OECD model. For tax information exchange agreements, as the commentary on article 3 to that model notes:

Paragraph 2 of the multilateral version provides that the Contracting Parties may agree to extend the Agreement to cover indirect taxes. This possible extension is consistent with Article 26 of the OECD Model Convention on Income and on Capital, which now covers “taxes of every kind and description.” There is no equivalent to paragraph 2 in the bilateral version because the issue can be addressed under paragraph 1.

18 See Marc Bourgeois and Adeline Römer, “Effects of Existing Tax Treaties on VAT (Relevance of Arts. 24-27 OECD Model for VAT/GST),” in Value Added Tax and Direct Taxation — Similarities and Differences, (2009) (contending that “the framework for the exchange of information for income tax purposes does not differ significantly from the one for VAT purposes” and noting that nothing seems to restrict tax administrations from using tax information received for income tax purposes for the purposes of VAT). See also Dourado and Becker, supra note 16, at para. 32 (“in the OECD’s view, the exchange of information clause in bilateral tax treaties should be given a very wide scope. . . . The exchange of information provision in tax treaties may be either directly or indirectly relevant for the purpose of applying the domestic laws concerning value added taxes or gross sales taxes”). For a detailed analysis and further instruments in this regard, see Thomas Ecker, A VAT/GST Model Convention (2013).

19 Article 60 of Regulation No. 904/2010 states, “this Regulation shall be without prejudice to the fulfilment of any wider obligations in relation to mutual assistance ensuing from other legal acts, including bilateral or multilateral agreements.” Further, para. 5.5. of the commentary on article 26 of the OECD model provides that specialized instruments for the exchange of information related to customs duties will generally prevail over the provision of article 26.

20 Council of Europe, “European Convention on Mutual Assistance in Criminal Matters” (Apr. 20, 1959).

21 European Court of Auditors, “E-Commerce,” supra note 12.

22 European Court of Auditors, “Tackling Intra-Community VAT Fraud: More Action Needed,” Special Report No. 24 (2015).

23 Dourado and Becker, supra note 16, at 68.

24 See, e.g., Roberto Codorniz Leite Pereira, “The Emergence of Transparency and Exchange of Information for Tax Purposes on Request as an International Tax Custom,” 48(6/7) Intertax 624, 624-625 (2020).

25 Council of the European Union, “Council Conclusions on the Future Evolution of Administrative Cooperation in the Field of Taxation in the EU,” 8482/20 FISC 122 ECOFIN 454 (June 2, 2020).

26 See Nevia Čičin-Šain, Tina Ehrke-Rabel, and Joachim Englisch, “Joint Audits: Applicable Law and Taxpayer Rights,” 10(4) World Tax J. 77 (2018) (presenting the case for a coordinated approach to joint audits and administrative cooperation for different types of taxes in the EU). In that article, the authors suggest that the heterogeneity of the conditions for a joint audit and the possible role of the foreign officials in administrative cooperation procedures for direct taxes, VAT, and excise duties:

is probably a manifestation of overly rigid departmentalization within the European Commission when drafting the proposal, as well as within national tax administrations when advising their governments on the adoption of those acts. This situation should be overcome upon an overhaul of the entire system of EU legislation on administrative cooperation in tax matters, aimed at codifying taxpayer rights at the EU level.

27 See Madeleine M.W.D. Merkx, “The Wizard of OSS: Effective Collection of VAT in Cross-Border e-Commerce,” inaugural lecture, Erasmus School of Law at 47 (Feb. 7, 2020).

END FOOTNOTES

DOCUMENT ATTRIBUTES
Jurisdictions
Subject Areas / Tax Topics
Magazine Citation
Tax Notes Int'l, Oct. 5, 2020, p. 71
100 Tax Notes Int'l 71 (Oct. 5, 2020)
Authors
Tax Analysts Document Number
DOC 2020-33976
Tax Analysts Electronic Citation
2020 TNTG 205-17
Copy RID