Europe needs a "fundamental change" to its VAT system to help beat fraud costing up to €250 billion a year, according to Laszlo Kovacs, the European Union's tax chief.

Finance ministers will discuss ways to cut the huge fraud bill in Berlin today, but they are divided on the best way forward.

Peer Steinbrück, Germany's finance minister, wants ministers to back his "reverse charge" option for tackling fraud, which would mean turning his country's sales tax system on its head.

So-called "missing trader" fraud occurs when criminals buy goods VAT-free from another member-state, sell them on with tax added and fail to pass on the tax to the authorities.

Mr Kovacs said that some member-states had a negative view of the German plan and Mr Steinbrück admitted that only Belgium and Austria were supporting his initiative.

Under the German model, sales taxes would be charged at the end of the supply chain, a move which could open up other forms of fraud and which is viewed by some business leaders as excessively bureaucratic.

The German finance minister said that the chances of his proposal gaining support had increased because Britain had been allowed by the European Commission to introduce the "reverse charge" model, but only for mobile phones and computer chips.

However, if the German plan fails to garner stronger support today, Mr Kovacs will step up work on a separate plan whereby tax would be effectively levied at the start of the supply chain.

That model also has critics in some member-states, which believe that it would require a degree of tax harmonisation, but Mr Kovacs insists that radical action is needed soon.

"I am emotionally committed to tackling VAT fraud, which is becoming more and more widespread," he said.