Since 2009, our nine European associations, comprising regulators, exchanges, brokers, clearing houses, gas and electricity transmission system operators, energy trading firms as well as gas and electricity utilities, have united to take action to combat VAT fraudsters’ attempts to penetrate our markets, as previously mentioned in our December 2011 Joint Statement. Despite the coordinated action of EU energy stakeholders, a series of measures taken at the national level and our repeated warnings to the authorities, fraudsters have meanwhile become more sophisticated, and signs of initial VAT fraud have been reported in the wholesale electricity and gas sector.
Long term fiscal measures are now needed to eradicate the risk of VAT fraud in the gas and electricity sector to prevent significant VAT losses to Member States’ Exchequers similar to those experienced in the CO2 emissions trading markets in 2009. Hence, our associations met in March 2013 with the Irish Council Presidency to express our concerns and identify potential solutions. The European Commission and the Irish Presidency of the Council of the European Union presented an anti-VAT Fraud Package which would equip EU countries with real armour against fraudsters including:
• Reverse Charge Mechanism to be implemented at the discretion of each Member State and extended to include trading in those sectors which are / have been already the subject of derogation requests, such as electricity and gas. The Reverse Charge Mechanism moves the obligation for collecting VAT from the supplier to the recipient of the goods, thus removing the VAT fraud “opportunity” on these trades.
• Quick Reaction Mechanism allowing Member States to apply for a derogation from the Directive 2006/112/EC (Previously the Sixth VAT Directive) enabling them to rapidly implement fiscal measures to deal with the risk of unknown, sudden and massive fraud.
We welcome the European Commission’s and the Irish Council Presidency’s resolve to push forward measures to combat VAT fraud. We encourage Member States to work towards reaching agreement on a proposal which could secure unanimous support. The adoption of this package would remove the vulnerability to fraud faced by the wholesale electricity and gas markets, and would thus protect market integrity by permitting freedom of commerce and fair competition on behalf of European consumers.
This holds true for all industries exposed to fraudulent activities. Therefore, we call out to other sectors threatened by VAT fraud to join forces to publicly support the proposed package, and strongly urge ALL Member States to act now to protect the safety and integrity of EU wholesale markets for the benefit of the final customer.
Brussels, 25 March 2013
CEER: Council of European Energy Regulators
EACH: European Association of CCP Clearing Houses
EFET: European Federation of Energy Traders
ENTSO-E: European Network of Transmission System Operators for Electricity
ENTSOG: European Network of Transmission System Operators for Gas
Eurelectric: Union of the Electricity Industry
Eurogas: European Union of the Natural Gas Industry
Europex: Association of European Energy Exchanges
LEBA: London Energy Brokers Association