E-commerce: many of the challenges of collecting VAT and customs duties remain to be resolved

Summary:

The EU encourages e-commerce to ensure that businesses and consumers can buy and sell internationally on the internet as they do on their local markets. Member States are responsible for the collection of VAT and customs duties due on e-commerce cross-border transactions. We carried out this audit because any shortfall in the collection of VAT and customs duties affects the budgets of the Member States and the EU, as they must compensate for it in proportion to their GNI. Our auditors examined whether the European Commission has established a sound regulatory and control framework for e-commerce with regard to the collection of VAT and customs duties, and whether Member States’ control measures help ensure the complete collection of VAT and customs duties on e-commerce. We found that despite recent positive developments the EU is not currently dealing adequately with these issues but have addressed some of the weaknesses identified with the “e-commerce package”.

We make a number of recommendations as to how the European Commission and the Member States should better address the challenges identified and establish a sound regulatory and control framework.

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