Leipzig, 11 May 2010

As in the case of CO2 trading, possible sales tax fraud in trading in power and natural gas would also cause considerable tax losses. For this reason, trading in power and natural gas also needs to be protected against sales tax fraud. Iris Weidinger, CFO of European Energy Exchange AG (EEX), emphasises: “An extension of the reverse charge procedure to national power and natural gas trading transactions can effectively prevent sales tax fraud. For this reason, EEX demands the introduction of the reverse charge procedure also for the spot market for power and natural gas throughout Europe.“ EEX is contacting marketing participants and associations in order to jointly look into possibilities for a detailed design.

Under the requested reverse charge procedure the sales tax liability is transferred from the seller to the buyer and the payment of sales tax is shifted to the end of the tax chain. The buyer does not pay the sales tax to the seller but retains it and the sales tax liability and input tax are netted out. As a result of this, fraud by a “sales tax carousel”, in which German companies buy the product abroad and then sell it within Germany without paying sales tax, will no longer be possible.

However, in order to prevent definition difficulties the reverse charge procedure should only be applied on the wholesale market for power and gas deliveries.

The European Union has recently adopted the amending directive for the extension of the reverse charge procedure to national trading in CO2 emission allowances in order to prevent carousel transactions in national trading in CO2 emission allowances. On account of the planned adjustment of the German sales tax law as of 1 July 2010 sales tax fraud in emissions trading in Germany will be excluded in the future.

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