WITH EU emission markets facing losses of at least five billion euro due to VAT frauds, European wholesale electricity and gas markets are now on the hit list of tax fraudsters. To prevent the same from happening in the gas and electricity markets, the Member states have got together to issue a statement against VAT frauds in Brussels.

European energy regulators (CEER), clearing houses (EACH), energy trading firms (EFET), electricity transmission system operators (ENTSO-E), gas transmission system operators (ENTSOG), the electricity industry (Eurelectric), the gas industry (Eurogas), energy exchanges (Europex) and energy brokers (LEBA) have come together to reaffirm that they will take whatever action necessary to prevent these frauds. The statement issued declares the measures that could be adopted by each national jurisdiction, as appropriate and given the relevant legal structures and distribution of responsibilities, in order to combat VAT fraud in the energy markets which include:

++ Raising awareness of the potential threat of VAT fraud among market and industry stakeholders in each Member State;

++ Maintaining a dialogue with law-enforcement agencies, tax authorities and financial intelligence units on the functioning of electricity and gas markets;

++ Identifying and/or creating information channels and the legal environment at national level to competent authorities of suspicious behavior;

++ Ensuring that “Know your Customer” (KyC) procedures can deal appropriately with this new type of risk, in an effort to prevent VAT-fraudsters from entering the market;

++ Making full use of the registration scheme in the Regulation on Energy Market Integrity;

++ Transparency (REMIT) to help improve transparency on who is active in the market and to facilitate the detection of fraudsters

++ Reinforcing control measures at all levels of the trading chain to detect abnormal trading behaviour and report it to the relevant authorities.

The members have also sought help of national tax administrations and the European Commission (DG TAXUD) to study potential long-term fiscal measures that could permanently remove the risk of VAT fraud from electricity and gas markets.