The European Parliament's FISC subcommittee held a public hearing on 2 June 2026 to examine VAT fraud and the effectiveness of the reverse charge mechanism (RCM) compared to digital reporting requirements (DRR) under the VIDA package. Experts and MEPs diverged on whether RCM should be phased out or retained as a temporary tool until digital solutions are fully operational.
Professor Rita De La Feria (University of Leeds) argued that RCM is not a long-term solution, as it undermines VAT's third-party reporting advantage and can transform VAT into a retail sales tax. She noted that fraud is now widely seen as unacceptable, but perceptions of prevalence remain high, partly due to focus on multinational tax avoidance. She called for better legal design, harmonization, and fewer exceptions.
Cristina Veinsier (Accountancy Europe) acknowledged that RCM has helped combat fraud in sectors like construction and mobile devices but creates administrative burdens and risks shifting fraud to other sectors. She suggested prolonging RCM until DRR under VIDA is fully operational (2030) and keeping it for fraudulent sectors even after.
Marta Val Jimenez (Repsol) shared Spain's experience in the fuel sector, where criminal networks controlled the entire supply chain, making RCM ineffective. Spain instead imposed guarantees, joint liability for excise warehouse holders, monthly VAT settlements, and near-real-time invoicing (SII system), which improved fraud detection.
MEP Herbert Dorfmann (EPP, Italy) asked about linking RCM phase-out with VIDA implementation and the cost burden of RCM on SMEs.
The hearing highlighted a split between those favoring RCM as a temporary tool and those pushing for digital solutions. Next steps include the VIDA package's DRR implementation by 2030 and possible prolongation of RCM until then. Affected stakeholders include businesses (especially SMEs), tax authorities, and consumers.
Impact on stakeholders: SMEs face compliance costs from both RCM and new digital reporting, while large businesses may benefit from harmonization. Tax authorities gain better fraud detection through digital tools but may lose RCM as a quick fix. Consumers could see lower prices if fraud is reduced, but administrative burdens may be passed on.