A Focus on Fighting VAT Fraud

VAT fraud is a serious issue within the European Union. Various schemes of VAT fraud have been discovered by the authorities in the past. In general all businesses subject to VAT are vulnerable to VAT fraud. After the detection of VAT fraud on the Carbon market and the introduction of the reverse charge mechanism in some EU members states, there is a risk of fraudulent activity moving to energy products.

In this high risk context of possible VAT fraud on the electricity market, EPEX SPOT actively participates in the different actions to fight against VAT fraud. The market Surveillance coordinates all these actions.

To reduce the risk of fraud on the EPEX SPOT markets, EPEX SPOT – in cooperation with EEX and Powernext – has reinforced its “Know your Customer” process to accept new companies. EPEX SPOT has set up a decisional committee to scrutinize thoroughly the application of new prospects.

The Market Surveillance is involved in the different phases of the company’s life on the EPEX markets:

•  - during the “Know your Customer” process this body performs additional investigations if the objective criteria are not fulfilled. The decision committee makes a decision to admit the prospect with regard to the findings.
•  - during the members’ life, the Market Surveillance monitors the indicators (global and individual) which reveals potential VAT fraud activities.

Another important action is to warn all the stakeholders about the VAT carrousel risk in order to avoid that fraudsters have access to the electricity market through members and available facilities.

EPEX SPOT has participated in different meetings with other Exchanges, TSOs, regulators and Tax authorities to alert on this matter and to show the possible impact on prices and misuse of the market. EPEX SPOT pushes for an efficient way to assess suspicious activity and, if found, warn the relevant authorities on the companies possibly involved in VAT frauds.

 

EPEX SPOT has been active to tackle the issue on European level in order to raise awareness of the problem. A communiqué on VAT fraud prevention in the electricity sector was signed in December 2011 by nine energy associations, among them CEER, EFET, Europex, Eurelectric and ENTSO-E.