The European parliament has backed a report that aims to break the EU deadlock over combating VAT fraud.
The key recommendation of the document written by Sharon Bowles MEP is to levy VAT of 15% on all cross-border EU trade of goods and services.
Under the proposal, member states would charge a top-up rate to bring the total VAT charge in line with current levels within their own countries. For example, the UK would charge an additional 2.5% on all imports under the new system.
Ms Bowles said: 'Member states alone cannot deal with tax fraud because fraudsters are exploiting cross-border loopholes. Only through the EU can a solution be found, and it is clear… that this issue has transcended political and geographical boundaries.
She continued: 'VAT fraud alone is said by the European Commission to cost exchequers €40bn a year, roughly the same as the EU spends on the Common Agricultural Policy.
'In the UK, HMRC estimate that in the tax year 2005-2006, VAT revenue losses amounted to £14.4 billion.'
