VAT Talks - Charlène Herbain

Charlène Herbain

In the fourth episode of VAT Talks, we discuss VAT with Charlène Herbain. We are very pleased that Charlène Herbain accepted our invitation, she is lecturer at the University of Luxembourg and the University of Louvain. Furthermore, she works as a VAT expert for Ernst & Young in the Financial Services office. In this VAT Talks, we discuss VAT in Belgium, the importance of the EU in fighting fraud and the fact that VAT actually stands for Very Attractive Tax!

For how long have you been working in VAT, how did you end up in VAT? With what organisations did/do you work?

“I studied VAT during my 3rd year at University in Nancy in France, where I attended a Magistère[1] in European Business Law. The professor, Christian Gosserez, was very articulate, he made everything sound so logical. I chose to do VAT after this ‘encounter’, and ever since my very first internship in a litigation boutique in Paris I have been doing VAT.”

“I am currently working at Ernst & Young (EY) in the Financial Services Office. I provide legal assistance and advice on VAT matters regarding all the operations performed by banks, insurance companies, investment funds and securitisation vehicles, including M&A transactions and corporate restructuring operations. There is also a policy side to my job: together with EY’s international network, I put forward recommendations amenable to the business community that fit with the general principles governing the European VAT system. I am very fortunate that my work is so fascinating and intellectually challenging.”

“Besides, I lecture at the University of Luxembourg on Financial VAT, and on general VAT at the Catholic University of Louvain la Neuve in Belgium. I am also a guest lecturer on VAT policy at the University of Nancy in France.”

In a previous interview Redmar Wolf told us that ‘VAT eventually stole his heart’, did the same thing happen to you?

“This happened immediately. At my first VAT class given by professor Gosserez, back in 2003. I love VAT. The way it is built is smart, the fact that it requires a deep dive into the factual situations makes it a very lively subject where you will learn about offshore oil and dredgers but also about hedge fund and private equity tactics. Furthermore, it requires you to refresh your knowledge and challenge yourself all the time because of the case law of the Court of Justice of the European Union (CJEU).”

In our blogpost series, we try to give the reader different perspectives, from different countries and organisations. Can you briefly discuss the VAT system in Belgium? What are the main weaknesses according to you?

“In Belgium, VAT generates almost a quarter of the tax revenue collected by the federal state. This revenue is used to finance the social security system. For example, in 2018 more than €11 million was allocated directly to financing the social security system. Furthermore, it is used to finance the subnational communities[2] and to indirectly fund the EU. VAT is indeed one of the EU’s ‘own resources’[3]. The legal bases are the VAT Directive and the decrees taken for its implementation. There are also many administrative circulars[4] and all kinds of other official documents that form the basis of the Belgian VAT legislation. This makes it very difficult for the taxpayer to get access to this legislation.”

What measures have been taken to fight VAT fraud in the past in Belgium as well as in the EU?

“The Transactional Network Analysis (TNA) was developed in Belgium. It is based on a data mining software with intuitive algorithms that assesses data provided by companies in their VAT returns, to detect suspicious networks. Since May 2019, it has become an EU-tool to make the collection of VAT more fraud proof as all EU Member States are able to use it. TNA interconnects Member States’ tax IT-platforms to permit the detection of suspicious VAT fraud nearly in real time.”

Many countries are currently using VAT measures in order to help taxpayers during the current crisis, think of delayments of VAT payments and VAT rate cuts. What do you think of these VAT cuts?

“Taxes, including VAT, can be more than a revenue raising tool, they can be used to promote certain societal objectives. Think of the reduction of inequality, social and environmental objectives and so on. Businesses have been able to apply for payment holidays (additional time), and a payment plan, if they had difficulties related to the COVID-19 crisis. They could also ask for a faster VAT refund and the deadlines for filing VAT returns have been postponed.”

“I am not sure I fully agree with these measures because decreasing compliance comes at the risk of allowing fraudsters to operate easily.** More importantly, the challenge is to direct those flexibilities solely to the businesses that need them. Many businesses suffered from the COVID-19 crisis, while some businesses benefited from it (medical protection equipment, online retail, remote IT services), and some businesses were not affected in either way.”

“Currently Belgium reduced the VAT rate for restaurant and catering services from 12% to 6%, this measure will be in force between June 8 and December 31, 2020. The real estate sector asks for a cut too. Because VAT is a tax that is raised on consumption, a lower rate will be relatively more advantageous for the people that consume the most, who need it the least. Moreover, the efficiency of a decrease in VAT rate(s) is a complicated question. Where an increase in VAT rates leads almost systematically to an increase of the price level, the contrary is not always true. The decrease is not always fully passed on to consumer prices. However, a VAT cut during a short period and in targeted sectors is certainly a good thing as it can stimulate economic growth either by the induction of customer demand for these local services or by increasing the margin of the suppliers who clearly need the receipts.”

What do you think the role of VAT should be in the aftermath of the crisis?

“The momentum should be seized to rethink the role of VAT. For example, VAT should be a tax that can be relied upon to make sure that online sellers pay their fair share of taxes (top up). Because of their unique position, certain online sellers don’t pay a whole series of taxes but nonetheless rely on the infrastructure which these taxes pay for; think of maintenance/lightning of the roads, cardboard recycling, etc.”

“VAT should also help the green transition by encouraging producers and consumers to take responsibility for the damage linked to their activities or consumption. So far, the EU research in favour of introducing differential VAT rates to promote green products has failed and the CJEU has ruled in line with the VAT Directive against certain national rules that favoured energy efficiency. There is no more time for such nonsense. VAT needs to be adapted to take into consideration the sustainability of the production of goods and services. It is time for a new neutrality, for a green neutrality.”

Some argue that VAT fraud will rise during this crisis. Do you have an opinion on this? Should we worry?

“With the lockdown, online sales increased and new operators entered the market. A number of these new online sellers may have missed their obligations by either not being aware of all the VAT related obligations or being reluctant to apply them. Fraudsters may have taken the opportunity of the compliance postponement. Detection and action is essential at this time.”

Other countries in the EU are experimenting with invoice reporting systems such as the one in Spain, Italy, Hungary that are based on the ideas of such systems in Latin-America and also have similarities with the Chinese Golden Tax system. Do you encourage such measures?

“VAT real time reporting is great but only under certain conditions. Some of the existing models are not good enough from my perspective, they are not tailored to fast paced sectors of the economy and/or impose too much burden on businesses. In that respect, the additional red tape imposed on businesses by asking them to report the data of their invoices after issuance (inputting the data), as an addition to the VAT return, is not acceptable. Similarly, asking the taxpayers to report the data of their invoices before their issuance and wait for approval from the tax authorities before sending invoices to the buyer, is also not acceptable.”

“Reporting the invoices simultaneously at the moment they are issued in an automated manner is a solution. This solution needs to rely on a standardized layout to allow automated invoice processing and use of algorithms to assess the data.”

What should the role of the EU be in finding a solution on VAT fraud, is the best solution an EU wide solution? If so, is this feasible given the fact that unanimity is needed to change the VAT Directive?

“The fight against VAT fraud is closely linked to Member State sovereignty, which is protected by the requirement of unanimity. However, the fight against VAT fraud is amongst the policy areas with strongest support for increased EU intervention. So the question is what should we do with this hiatus? I think we need to acknowledge that the fight against fraud is a shared competence between individual Member States and the EU because VAT is financially important both on a national and on an EU level. The damages of VAT fraud affect both the national and EU budgets.”

“Furthermore, we have to recognize that if the European Commission has been putting in place a battery of tools that Member States may use to fight intra-community VAT fraud, the improvements, in the absence of unanimity, are slow and insufficient. See for example the EU proposal for a definitive system to tackle VAT fraud: the aim of the reform is in particular to tackle ‘carousel’ and ‘missing trader’ fraud. The proposed new system would be a real improvement: it would be much more fraud-proof and in addition, compliance costs for businesses would be reduced by simplifying and modernising the VAT obligations and VAT collection process. However, at present, because unanimity is required, all Member States suffer because of the unwillingness of a few. Worse still, the reasons for not agreeing are not always based on the merit of the proposal; some Member States use unanimity as a bargaining chip for unrelated matters.”

“Moreover (1) the European Commission has a unique perspective and is much better positioned than any Member State alone to address the issue of VAT fraud and (2) protecting the EU’s financial interests against fraud is a key responsibility of the European Commission. So yes the solution should be EU wide and unanimity is required.

Do you have any last words for the reader, to enthuse them about VAT?

“If Maurice Lauré[5] had applied for a patent, his family would be richer than Michael Jackson’s family now.”

“The fact that VAT is great is demonstrated by its worldwide spread. All over the world, there are around 170 countries levying VAT. I am not going to list all reasons why VAT is a Very Attractive Tax, but just look at what is happening now, during the crisis. In every country where there is a VAT, measures are implemented through VAT to help those that need to weather the coronavirus crisis. VAT has this great advantage that it has an immediate effect on the economy, you grant a payment holiday and businesses can keep the VAT they collect for longer, you cut the rate and you have a stimulus for consumption. If VAT were fraud-proof, we could tailor a VAT to the economy and the environment and also to the payment capacity of each and everyone in such a way that no other taxes would ever be needed.”

We would like to thank Charlène again for her time and for giving her perspective on VAT. The opinions Charlène expressed are her own and do not express the views of EY. If you have any questions, suggestions or if you want to be our next interviewee, do not hesitate to contact us via

  1. In France, a Magistère is a highly selective three-year course.

  2. Belgium has a French speaking, Dutch speaking and German speaking community.


  4. A circular (or circulaire in French) originates from a ministry with the aim of giving an interpretation of a legal text or of a regulation, with a view to applying such regulation consistently.

  5. Maurice Lauré is the founding father of VAT. Read more about the history of VAT here: