The European Parliament's FISC subcommittee held a public hearing on 2 June 2026 to discuss combating VAT fraud, with experts and stakeholders presenting divergent views on the reverse charge mechanism (RCM) and digital reporting requirements (DRR) under the VIDA package. Professor Rita De La Feria from the University of Leeds argued that RCM is not a long-term solution, as it undermines VAT's third-party reporting advantage and risks transforming VAT into a retail sales tax. She stressed 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 from Accountancy Europe noted 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 in 2030 and keeping it for fraudulent sectors even after. Marta Val Jimenez from 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 divergences 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. The hearing underscored trade-offs: RCM reduces fraud in targeted sectors but shifts it elsewhere and burdens SMEs, while digital solutions like DRR offer long-term efficiency but require significant investment and harmonization. Spain's SII system demonstrates that near-real-time reporting can enhance detection, but its success depends on robust IT infrastructure and compliance costs. The debate reflects a broader cleavage between temporary, sector-specific measures and permanent, technology-driven reforms, with implications for EU VAT harmonization and the competitiveness of businesses across member states.