Government Resists Reverse VAT System Recommended to Prevent Carbon Trading Fraud
Estonia has rejected a recommendation from two European Commission officials that it use a reverse-VAT scheme for greenhouse emissions allowances to combat the practice of traders buying carbon credits in one country VAT-free and then getting fraudulent reimbursements.
Tax commissioner Algirdas Semeta and climate commissioner Connie Hedegaard recently sent a letter to 13 countries, including Estonia's Finance Minister Jürgen Ligi and Envirnoment Minister Keit Pentus, expressing concern about fraud on the carbon trading market. They said that it would be reasonable for all EU member states to establish reverse VAT scheme on the credits.
Finance Ministry spokesperson Rainer Laurits told uudised.err.ee that such a measure would clash with Estonia's principle of as simple a tax system as possible.
But he said if fraud started taking place in this area in Estonia, reverse VAT would be considered, where the buyer of the credit has the obligation of accounting for and declaring the VAT.
Denmark's carbon registry has suffered the worst case of VAT fraud, absorbing a €5 billion loss.
Kristopher Rikken