Working hard for Wales in Europe
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At a time when national and regional budgets throughout Europe are experiencing cuts it is vitally important that measures to combat fraud in EU budget expenditure and revenue collection are taken seriously.
In order to be able to tackle fraud at EU and Member State level it is essential to know how much fraud is committed against the EU budget. However, the lack of a standardised method for collecting and reporting data has resulted in a distorted and unclear assessment of the level of fraud in revenue and expenditure at EU and national level.
The House of Lords' report released today on 'The Fight Against Fraud on the EU's Finances' estimates that €5 billion is lost to fraud annually. I believe that the level of fraud cannot be estimated, as it is in this report, by calculating the total level of fraud in the UK's public spending and applying the same criteria to the EU budget. The only way to accurately assess the level of fraud is to collect exact data from national governments by introducing uniform rules that oblige all Member States to report fraudulent activity according to the same method.
The situation at the moment, with some countries reporting relatively high numbers of suspected fraud cases and others reporting none at all, calls into question the reliability of the methods used at Member State level for collecting and reporting data. The European Parliament has consistently called for this to be addressed and it is now up to Member States to take the reporting of fraud seriously if we are to effectively tackle the level of fraud throughout the EU.
Fraud in the expenditure of the EU budget is frequently misunderstood and misrepresented. It is often alleged that the mismanagement of funds at EU level is widespread. However, while, as with any public spending, there are occasionally errors at different stages of the financial procedure, it must be highlighted that with 80% of EU funds administered at Member State level, national governments are first in line when it comes to ensuring that EU money is spent correctly. So, in addition to improving reporting, it is clear that strengthening measures to counter fraud at Member State level is essential. The distinction between errors in expenditure, such as filling a form in incorrectly and fraudulent irregularities, which always trigger tough legal and recovery measures is also often overlooked, sometimes resulting in a distortion of the figures regarding fraud in the EU budget.
As well as managing 80% of EU funds, Member States are also in charge of the collection of their own resources. The failure of national governments to collect revenue directly affects the economy at national and EU level. One staggering statistic about the loss of resources at national level estimates that € 1 trillion in public money is lost due to tax fraud and tax avoidance every year in the EU. This is approximately €2000 for every European citizen, it is also more than Member States spend on healthcare and four times more than is spent on education throughout the EU. This highlights the fact that fighting tax evasion should be of utmost priority to both the European Commission and the Member States.
It is also especially concerning that VAT fraud seems to be widespread and, as such, is a severe threat to the EU's financial interest. It is disconcerting that the House of Lords reported the UK Government's lack of willingness to engage on the issue of VAT fraud, claiming it 'was outside the (inquiry's) scope'. VAT fraud should be taken seriously by all Member State governments, with a focus on getting a deal in the European Council on the Commission's proposals to modify the outdated legislation governing the Quick Reaction Mechanism against VAT fraud.
I am pleased to see that the House of Lords' report recommends that the UK Government addresses the lack of cross-border cooperation between the UK and other national governments. Rather than resorting to damaging austerity measures in an attempt to recover from the economic crisis, national governments should focus on coordinating EU-wide measures to combat the fraud that is costing them millions each year.
- Wednesday, 17 April 2013 -