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2017 Report – Role of the Customs Administration in granting the exemption of exports from VAT in the course of non-commercial travel

May 12, 2017

0 Summary
We audited the role of the Customs Administration in granting the exemption of exports from VAT in the course of non-commercial travel. Our findings suggest that there is a need for action. The current procedure of the Customs Administration at the Swiss border

  • does not ensure adequate checking of exports and of compliance with the requirements for tax exemption;
  •  imposes a high administrative burden on the Customs Administration; and
  • in times of high traffic load, leads to considerable waiting times at the border crossings.


We therefore suggest that exports in the course of non-commercial travel be no longer exempted from VAT from the first cent but only in cases where the invoiced amount exceeds €175. EU law permits such a value threshold. The Federal Ministry of Finance has rejected our proposal. It intends to implement an electronic self-processing procedure. We doubt that such IT procedure is feasible and can be developed on a timely basis. Irrespective of this, it would best be supplementary to a value threshold.

Our assessment is essentially based on the following considerations:

0.1
Where private individuals not resident in the European Union buy goods for private consumption and export them from Germany in the course of noncommercial travel, these goods are generally exempt from VAT payable in Germany. This tax exemption applies irrespective of the value of the goods.

0.2
When the border is being crossed, the Customs Administration certifies the export of the goods by placing a stamp on the export pay slip. In 2015, 21.9 million export pay slips were stamped at the customs checkpoints. Of this number, more than 15 million were stamped at the Swiss border. At peak times, up to 1,000 export pay slips have to be stamped each hour. The buyer of the goods returns the stamped export pay slip to the seller who can claim the tax exemption from his tax office. In practice, the seller refunds the purchaser an amount equivalent to the VAT paid.

The European Union Directive on the Common System of Value Added Tax provides for the tax exemption of these goods where the total value of the delivery exceeds €175. However, the EU Member States may derogate from this value threshold. In Germany, the goods are exempt from VAT from the first cent.

0.3
The Federal Ministry of Finance has prescribed a checking rate for goods leaving Germany. At the Swiss border, the actual checking rate falls far short from the target. On the airports, the checking rate is higher but does not meet the prescribed target either. The accuracy of the export pay slips is therefore not ensured.

0.4
Reinforced checks at the Swiss border would aggravate the traffic problems in the entire region because congestion would extend back into the built-up areas. As in the past, this would give raise to protests by municipalities and the retail trade. Furthermore, new and/or additional customs checkpoints, additional lanes for customs processing, parking lots and checking spaces would have to be built and many more customs officers would have to be assigned to the task of certifying the export pay slips. Such measures would cost many millions of euros.

0.5
To lighten the workload of the Customs Administration with regard to the checks of export pay slips, the Federal Ministry of Finance intends to install an electronic self-processing system at the Swiss border. It cannot provide a robust estimate of the costs involved. In our opinion, it will not be possible to implement such a system within a foreseeable time scale since key preliminary technical, legal and economic questions have not been clarified. These preliminary questions will have to be clarified first before initiating an efficiency appraisal and a contract award procedure.

0.6
We advocate implementing a value threshold of €175 per person in national law. This would relieve the workload especially at the Swiss border. The customs administration would again be able to properly perform its checking tasks. The traffic situation in the border region would also improve. We believe that a value threshold would moreover increase VAT revenue by hundreds of millions of euros. In our assessment, shopping patterns in the region of the Swiss border and at airports would not be significantly affected. The probably decisive factor that motivates Swiss people to shop in Germany is the considerable difference in price levels between Germany and Switzerland and the sustained favourable exchange rate between the euro and the Swiss franc. The exemption from VAT only plays a minor role.

An electronic self-processing system is not an alternative to a value threshold but at best a complementary element. The countries that have an electronic selfprocessing procedure in place also have implemented a value threshold.

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