VAT Fraud and Emission Allowances

The absence of Community legislation on the value-added tax (VAT) treatment of allowances has meant that, after the detection of suspected cases of fraud, several Member States have departed from the guidelines adopted unanimously by the VAT Committee. While this situation has produced a swift reaction from the European Union (EU) through the Proposal for a Directive to amend the VAT Directive aimed at giving a unified response to the phenomenon of the plots of fraud in general, it is surprising its voluntary nature. In addition, this article will show how, given the urgency of adopting a solution, the special characteristics of the emission rights market to arbitrate other measures have not been taken into account. Likewise, it also tries to show that the general answer is, of course, forgetting the inclusion of the tax treatment of allowances in the proposed directive to prevent Member States adopt different treatments that may distort the functioning of the allowance.