Within the European Union, VAT rates for foods vary between countries, from a high of 27% in Hungary to as low as 5%. Goods are delivered tax-free and recipients are required to invoice themselves the correct local VAT amount.
However, there are ways to avoid these invoices, such as ‘fake exports’, whereby companies buy goods in one member state and export to another, allowing them a VAT refund; or ‘carousel fraud’, whereby several fictitious companies buy goods tax-free, then sell them on including VAT and disappear before local authorities can claim the tax.
“FoodDrinkEurope encourages Member States to reach an agreement on the anti-VAT Fraud Package which would find unanimous support within the business community across the EU,” the organisation said in a statement. “Not only would the adoption of this Package remove food and drink industry markets’ vulnerability to VAT fraud, it would also help to protect market integrity by assuring fairer intra-EU trade and fair competition which ultimately benefits Europe’s consumers.”
The package was discussed at the European Council on May 22.
The food commodities sector has also welcomed the package, saying that the grain trading sector, the oilseeds crushers and the sugar trading sector are particularly affected by VAT fraud in several Eastern European countries.
“The anti-Fraud Package on VAT presented by the Commission and the Irish Presidency comprises an excellent set of the measures needed to fight against fraudsters and re-establish fair competition for lawful grain, oilseeds and sugar traders,” according to a joint statement from trade bodies representing these sectors, COCERAL, FEDIOL and ASSUC.
According to FoodDrinkEurope, the package would help law-abiding grain trading companies regain their competitive position, and help member states recover VAT losses.
In Hungary and Bulgaria, for example, where VAT rates on food are higher than those in many other member states, VAT evasion is thought to account for about 30% of grain, oilseed and proteinmeal markets.