Many challenges in collecting correct amounts of VAT and customs duties on e-commerce remain to be resolved, according to a new report from the European Court of Auditors. In particular, EU controls are insufficient to prevent fraud and detect abuse, while enforcement of collection is still not effective. However, recent developments and new provisions for 2021 address a number of weaknesses identified, say the auditors.
In the EU, the European Commission is responsible for setting customs and taxation policies, strategies and legislation. As for any other goods and services, Member States collect VAT and customs duties on cross-border e-commerce transactions. By its very nature, e-commerce is particularly prone to irregularities in this respect.
The auditors assessed whether the Commission had established a sound regulatory and control framework and whether Member States’ control measures helped ensure the complete collection of VAT and customs duties due on goods and services traded over the internet. They also considered the likely impact of the legislative changes of the VAT e-commerce package that will enter into force in 2021.
“Any shortfall in the collection of VAT and customs duties affects the budgets of the Member States and the EU”, said Ildikó Gáll-Pelcz, the Member of the European Court of Auditors responsible for the report. “E-commerce is particularly open to abuse and its vulnerability to irregularities and fraud has not yet been fully mitigated.”