Simplified import customs procedures not robust enough to detect VAT fraud, EU Auditors say
A report by the European Court of Auditors (ECA) published on Monday 24 March highlights serious weaknesses in the EU’s handling of VAT fraud on imports, particularly when simplified customs procedures are used. Two simplified procedures — the “Release for free circulation – CP42” and the e-commerce-focused “Import One-Stop Shop” (IOSS) — are flagged as high-risk, with €260 billion worth of goods imported under these schemes between 2021 and 2023. The auditors found regulatory loopholes and inconsistencies, including the lack of harmonised rules for tax representatives, diverging practices on VAT identification, and disparities in sanctions between Member States. Member States’ checks on VAT procedures are inadequate, leading to significant VAT losses, with common fraud tactics including undervaluation of imported products like smartphones, textiles, and jewellery, they say. The auditors also found weak enforcement of conditions for VAT exemptions. Despite past recommendations, data-sharing issues persist, particularly between tax and customs administrations, they point out. While legislative reforms are in progress, the auditors warn that the risk of abuse remains unless stricter enforcement and improved cooperation are implemented. The European Commission welcomed the ECA report, outlining steps already taken, including the proposals under the VAT in the Digital Age (ViDA) package to enhance fraud prevention. It notably agreed with ECA’s recommendations to strengthen the regulatory framework, improve VAT number validation and assess rules for appointing tax representatives.
ECON draft report on the role of simple tax rules and tax fragmentation in European competitiveness
The European Parliament ECON Committee published on Monday 24 March its draft own initiative report on the role of simple tax rules and tax fragmentation in European competitiveness. The draft report, prepared by MEP Michalis Hadjipantela (EPP, Cyprus), emphasises that the EU’s tax agenda must prioritise simplification, digitalisation and cooperation to create a more competitive tax environment. It notably urges the Commission to systematically conduct ex ante impact assessments and competitiveness checks for all new tax proposals to reduce administrative burdens and align with economic growth objectives. Simplifying VAT rules, enhancing digitalisation through AI and addressing cross-border tax obstacles are key recommendations from the report. The report also reiterates the EU’s commitment to implementing OECD’s Pillar Two agreement but raises concerns over the US withdrawal from the OECD tax deal, urging the Commission to prepare contingency plans to protect EU interests and inform the EP. It further calls for legal clarity in implementing Pillar Two and to finalise the OECD administrative guidance. Finally, the rapporteur acknowledges the role of the Directive on Administrative Cooperation (DAC) in reducing tax evasion and increasing transparency, while also highlighting the complexity and administrative burden, especially under DAC6. Political groups are now drafting amendments ahead of the ECON Committee vote scheduled for 7 July 2025, with a plenary vote expected in early September.
EU Council agrees on the Stop-the-clock proposal
Member States’ representatives approved on Wednesday 26 March the Council’s position on the so-called Stop-the-clock directive, which postpones the dates of application of certain corporate sustainability reporting and due diligence requirements. The proposal forms part of the ‘Omnibus I’ package adopted by the Commission at the end of February 2025 to simplify EU legislation in the field of sustainability. It will postpone by two years the entry into application of the Corporate Sustainability Reporting Directive (CSRD) requirements for large companies that have not yet started reporting, as well as listed SMEs, and by one year the transposition deadline and the first phase of the application (covering the largest companies) of the Corporate Sustainability Due Diligence Directive (CSDDD). In view of significant implications for businesses, the Polish Presidency has treated this proposal as a top priority with the aim of providing EU companies with the necessary legal certainty as regards their reporting and due diligence obligations. The Polish Presidency is now enabled to enter interinstitutional negotiations with a view to reaching a provisional agreement with the European Parliament on this proposal. For its part, the European Parliament has scheduled on a vote on request for urgent procedure on this proposal on 1 April.
MEPs prepare their wishlist to strengthen the Single Market
The European Parliament IMCO Committee recently published its draft own initiative report on the implementation and streamlining of EU internal market rules to strengthen the Single Market. The draft report, prepared by MEP Anna-Maja Henriksson (Renew Europe, Finland), outlines key measures to strengthen the Single Market and address the EU’s lagging global competitiveness. The report highlights that excessive regulatory and administrative burdens are undermining investment, innovation, job creation, and business opportunities, especially for SMEs and start-ups. In particular, the report urges Member States to eliminate "gold-plating" and ensure consistent application of EU laws while calling on the Commission to adopt proportionate legislation, review outdated regulations and avoid legal overlaps. A mandatory early review clause for new legislation (every three to five years) is proposed to ensure continuous relevance without adding to the administrative load. The report stresses the importance of stakeholder engagement, urging the Commission to reform expert groups and create transparent, well-structured consultations that include SMEs. Digitalisation, including AI and electronic reporting tools, is identified as essential for reducing red tape and streamlining compliance processes through digital one-stop shops. The Commission is also encouraged to reduce unnecessary reporting burdens by extending reporting intervals, eliminating redundant requirements and adopting tailored approaches for smaller businesses. Furthermore, the report recognises the potential of a new EU-wide 28th legal regime, aimed at supporting the growth of smaller and innovative companies. The Plenary vote on this report is scheduled for beginning of September 2025.
European Commission launches an EU Sanctions Helpdesk for SMEs
The European Commission launched on Tuesday 25 March a new one-stop-shop providing support to European SMEs navigating the complex landscape of sanctions compliance. The EU Sanctions Helpdesk will provide freely personalised support to EU SMEs performing sanctions due diligence checks. The Helpdesk will manage a dedicated website featuring sanctions-related information, country-specific guidance, events, tips, lessons learned, and more. All UN and EU sanctions are to be covered by the Helpdesk, providing SMEs with the necessary information to manage the challenges of sanctions compliance with confidence. The EU now has over 40 sanctions regimes globally containing a wide range of restrictive measures, from targeted individual measures such as asset freezes to more comprehensive sectoral approaches targeting finance, trade or energy for instance. While there are instances where larger entities can benefit from support, the Helpdesk's focus is on SMEs as they typically have fewer compliance resources than large companies, the Commission said.
Warsaw seminar on the implementation of the AML package
The Polish Presidency of the Council of the EU organised on Thursday 27 March and Friday 28 March a seminar in Warsaw on implementing the EU’s Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) legislative package, addressing both legal interpretations and practical enforcement. Participants, including regulators, practitioners and EU representatives, aimed at establishing a uniform interpretation of the new legal framework to achieve a consistent approach across Member States while familiarising EEA Member States and EU candidate countries with the new framework. In his inauguration speech, Polish Finance Minister Andrzej Domański emphasised the importance of timely implementation, particularly in light of evolving technological challenges and international cooperation needs. Bruna Szego, Chair of the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) also took part in the opening session. Discussions covered supervisory bodies’ expanded roles, cooperation between Financial Intelligence Units (FIUs), and future trends in high-risk sectors like FinTech and crypto assets. The AMLA’s role in enhancing oversight and coordination was highlighted, along with efforts to improve enforcement of financial sanctions and streamline collaboration within the EU.
