The EU Commission is preparing for the biggest reform of EU VAT rules in a quarter of a century, in an attempt to crack down on an estimated EUR 50 billion in tax revenue lost to cross-border VAT fraud between countries within the European Union (EU). Over 150 billion of VAT is lost every year, according to the commission, and about 50 billion of this is estimated to be due to cross-border VAT fraud. In addition, companies currently trading across EU borders have about 11% higher compliance costs than those companies trading within one EU country.
The new proposal suggests that goods should be taxed the same way from one EU country to another in the same way as goods are currently taxed when sold and shipped within one EU country. These new changes will take effect within the next couple of years and is expected to reduce cross-border VAT fraud by around 80%, and will therefore create a new and robust VAT system for the EU.
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