Commission proposes VAT overhaul to fight carbon market fraud

The European Commission has announced plans to overhaul the EU’s VAT system in a bid to prevent fraudulent practices connected with the EU ETSⁱ. There have been alleged cases where carbon traders kept the VAT instead of notifying it to tax authorities. The prevalence of these so-called VAT “carousel ”fraudsters could make it difficult for the EU to promote cap and trade systems at the forthcoming climate change talks in Copenhagen. The Commission intends to harmonise policy between EU Member States and introduce a so-called “reverse charge” mechanism, which would remove the need for VAT to change hands between carbon traders every time carbon credits are sold.

The Commission proposal can be found here:

http://ec.europa.eu/taxation_customs/resources/documents/common/legislation/proposals/taxation/COM%282009%29511_en.pdf