Central European countries push EU for power to fight VAT fraud

VIENNA (Reuters) - Finance ministers from five central and eastern European countries joined forces on Monday to demand more power from the European Union to crack down on value-added tax (VAT) fraud, which they said was costing them billions. Ministers from Austria, the Czech Republic, Slovakia, Hungary and Bulgaria told a news conference they would ask the European Commission to change a VAT system that Austria's Hans Joerg Schelling said was "ineffective and has to be changed". Schelling said around 10 countries would join the initiative, which was launched by Prague and Vienna six months ago. Czech Finance Minister Andrej Babis said VAT fraud costs EU members around 50 billion euros ($56 billion) a year. Fraudsters typically import goods VAT-free from other countries, then charge VAT when they sell the goods to domestic buyers. The sellers then vanish without paying VAT to the state. Mobile phones, computer chips and electronic devices like MP3 players have been particularly prone to the practice. The fraud makes quick and lucrative returns and is difficult to prove, making convictions sparse. Schelling favored letting countries adopt a "reverse-charge" system in which the company buying -- rather than selling -- goods would be responsible for VAT, but Vienna's push on this has twice before hit resistance from Brussels. Schelling suggested the EU allow Austria and the Czech Republic to try changes in pilot programs. The EU could not be immediately reached for comment. (Reporting by Michael Shields; Editing by Susan Fenton)

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