At today’s ECOFIN meeting of EU finance ministers, the Czech representative is threatening to block the European Commission’s anti-tax avoidance directive. The Czech’s are claiming they have received no reply to their request to extend the reverse charge to reduce VAT fraud.
Along with a number of other Central European countries, the Czech Republic has lost potentially billions to cross border VAT fraud. The reverse charge withdraws the cash on the VAT part of the transaction to close down these opportunities. However, they do undermine a core principle of VAT – collection of VAT throughout the production chain. In affect, the reverse charge turns VAT into a consumer-only paid sales tax.
The EC’s anti tax avoidance scheme aims to curb tax saving opportunities on complex, multinational corporate structures. It includes limiting interest deductions and switch over clauses.
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