On the website of the Austrian Federal Ministry of Finance a media release titled: “Schelling applies for pilot project against VAT fraud - Pilot project for "reverse charging" on intercompany business” was published. In the media release it is announced that the Austrian Finance Minister Dr. Hans Jörg Schelling aims in the future to take stronger action against VAT fraud. The Dr. Schelling’s plan would be to transfer the settlement of value added tax to a "reverse charge" system, which according to him is less vulnerable to fraud. Since value added tax is subject to EU law, the European Commission must consent to any system change. The Austrian Finance Minister will file the relevant application at the meeting of the Euro Finance Ministers.

According to the media release, the core of the plan would be reversal of value added tax liability ("reverse charging"). At present, fraudsters are able to send goods in a circuit between several countries. The sales tax is then invoiced by the supplier and the recipient of the goods can obtain reimbursement of the money from the tax office by way of input tax deduction. However, the supplier ends up not paying the tax to the tax authority and files for bankruptcy. As a result, the revenue authority ends up bearing the costs. Through the "reverse charge" system, this problem would be solved, since the tax liability passes to the recipient of the goods and input tax deduction no longer applies.

"We have already converted to the reverse charge system several sectors that are particularly vulnerable to fraud. However, this is not enough, since the various EU countries are adopting different approaches in this regard. What we don't want is for a hotchpotch to emerge," adds Schelling. "The aim is therefore now to launch a pilot project and to transfer all business between companies to the reverse charge process". Dr. Schelling hopes to get the green light from the Commission for the field trial.

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