IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_10227.html
   My bibliography  Save this paper

Digitalization and Cross-Border Tax Fraud: Evidence from E-Invoicing in Italy

Author

Listed:
  • Marwin Heinemann
  • Wojciech Stiller

Abstract

The digitalization of transaction processes through tools such as electronic invoicing (e-invoicing) aims to improve tax compliance and reduce administrative costs. Another important aspect of digitalization is its potential to reduce tax evasion. We analyze the impact of the widely introduced e-invoicing in Italy on cross-border value-added tax fraud. As a proxy for this tax fraud, we make use of the discrepancy in trade data that is double-reported in both the importing and exporting country (trade gap). We calculate trade gaps based on product flows on the most detailed level between Italy and the remaining countries of the European Union. Our results suggest a significant decline in cross-border fraud in response to the introduction of mandatory e-invoicing, providing an important rationale for the application of this measure by other countries. Furthermore, we estimate that e-invoicing decreased the Italian revenue loss by €0.6 billion to €1 billion in 2019. This is in line with the statements of the Italian Ministry of Finance, which are probably based mainly on the revenue development. In this context, we underpin the suitability of the trade gap as an approach for the study of anti-fraud measures and provide a more accurate estimate of cross-border fraud. In addition, our study suggests that fraudsters shift their activities to similar products and drive honest traders out of the market.

Suggested Citation

  • Marwin Heinemann & Wojciech Stiller, 2023. "Digitalization and Cross-Border Tax Fraud: Evidence from E-Invoicing in Italy," CESifo Working Paper Series 10227, CESifo.
    • Handle: RePEc:ces:ceswps:_10227
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp10227.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Grzegorz Poniatowski & Adam Åšmietanka & Mikhail Bonch-Osmolovskiy, 2020. "Study and Reports on the VAT Gap in the EU-28 Member States: 2020 Final Report," CASE Reports 0503, CASE-Center for Social and Economic Research.
    2. Cristian Alonso & Ledys Feliz & Patricia Gil & Miguel Pecho, 2021. "Enhancing Tax Compliance in the Dominican Republic Through Risk-based VAT Invoice Management," IMF Working Papers 2021/231, International Monetary Fund.
    3. Javorcik, Beata S. & Narciso, Gaia, 2008. "Differentiated products and evasion of import tariffs," Journal of International Economics, Elsevier, vol. 76(2), pages 208-222, December.
    4. Cristina Strango, 2021. "Does Digitalisation in Public Services Reduce Tax Evasion?," Economic Research Guardian, Weissberg Publishing, vol. 11(2), pages 218-232, December.
    5. Bellon, Matthieu & Dabla-Norris, Era & Khalid, Salma & Lima, Frederico, 2022. "Digitalization to improve tax compliance: Evidence from VAT e-Invoicing in Peru," Journal of Public Economics, Elsevier, vol. 210(C).
    6. Cristina Strango, 2021. "Does Digitalisation in Public Services Reduce Tax Evasion?," Economic Research Guardian, Weissberg Publishing, vol. 11(2), pages 221-235, December.
    7. Loukia SERGIOU, 2012. "Value Added Tax (VAT) Carousel Fraud in the European Union," The Journal of Accounting and Management, Danubius University of Galati, issue 2, pages 9-21, August.
    8. Raymond Fisman & Shang-Jin Wei, 2004. "Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 471-500, April.
    9. Lee,Hyung Chul, 2016. "Can electronic tax invoicing improve tax compliance ? a case study of the Republic of Korea's electronic tax invoicing for value-added tax," Policy Research Working Paper Series 7592, The World Bank.
    10. Andrey Stoyanov, 2012. "Tariff evasion and rules of origin violations under the Canada-U.S. Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 879-902, August.
    11. Javorcik, Beata S. & Narciso, Gaia, 2017. "WTO accession and tariff evasion," Journal of Development Economics, Elsevier, vol. 125(C), pages 59-71.
    12. Sijbren Cnossen, 1998. "Global Trends and Issues in Value Added Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 399-428, July.
    13. Strango, Cristina, 2021. "Does digitalisation in public services reduce tax evasion?," MPRA Paper 106856, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bruno Emmanuel Ongo Nkoa & Jacques Simon Song, 2022. "Les canaux de transmission des effets des TIC sur la mobilisation des recettes fiscales en Afrique," African Development Review, African Development Bank, vol. 34(S1), pages 80-101, July.
    2. Xinzheng Shi & Zhufeng Xu, 2023. "Export tax refund and the misreporting by Chinese exporters," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1469-1489, November.
    3. Mirco Tonin, 2014. "Reporting import tariffs (and other taxes)," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(1), pages 153-173, February.
    4. Ronald B. Davies & Zuzanna Studnicka, 2022. "Tariff Evasion, the Trade Gap, and Structural Trade," CESifo Working Paper Series 10151, CESifo.
    5. Andualem T Mengistu & Kiflu G Molla & Giulia Mascagni, 2022. "Trade Tax Evasion and the Tax Rate: Evidence from Transaction-level Trade Data," Journal of African Economies, Centre for the Study of African Economies, vol. 31(1), pages 94-122.
    6. Beverelli, Cosimo & Ticku, Rohit, 2022. "Reducing tariff evasion: The role of trade facilitation," Journal of Comparative Economics, Elsevier, vol. 50(2), pages 534-554.
    7. Mohammad Farhad & Michael Jetter & Abu Siddique & Andrew Williams, 2018. "Misreported Trade," CESifo Working Paper Series 7150, CESifo.
    8. Cyril Chalendard, 2015. "Use of internal information, external information acquisition and customs underreporting," CERDI Working papers halshs-01179445, HAL.
    9. Bussy, Adrien, 2021. "Tariff evasion with endogenous enforcement," Economics Letters, Elsevier, vol. 207(C).
    10. Céline Carrère & Christopher Grigoriou, 2014. "Can Mirror Data Help To Capture Informal International Trade?," UNCTAD Blue Series Papers 65, United Nations Conference on Trade and Development.
    11. Sébastien Jean & Cristina Mitaritonna & Antoine Vatan, 2018. "Institutions and Customs Duty Evasion," Working Papers 2018-24, CEPII research center.
    12. Lin, Chin-Ho, 2018. "Tariff evasion in machinery production networks: Evidence from East Asia," Economic Modelling, Elsevier, vol. 70(C), pages 115-126.
    13. Chalendard,Cyril Romain & Duhaut,Alice & Fernandes,Ana Margarida & Mattoo,Aaditya & Raballand,Gael J. R. F. & Rijkers,Bob, 2020. "Does Better Information Curb Customs Fraud?," Policy Research Working Paper Series 9254, The World Bank.
    14. Cyril Chalendard, 2015. "Use of internal information, external information acquisition and customs underreporting," Working Papers halshs-01179445, HAL.
    15. Temesgen Worku & Juan P. Mendoza & Jacco L. Wielhouwer, 2016. "Tariff evasion in sub-Saharan Africa: the influence of corruption in importing and exporting countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(4), pages 741-761, August.
    16. Olalere Isaac Opeyemi, 2022. "Predicting Trade Mispricing: A Gaussian Multivariate Anomaly Detection Model ," GATR Journals jber221, Global Academy of Training and Research (GATR) Enterprise.
    17. Demir, Banu & Javorcik, Beata, 2020. "Trade policy changes, tax evasion and Benford's law," Journal of Development Economics, Elsevier, vol. 144(C).
    18. Mianshan Lai & Jia Hou, 2023. "Let us misinvoice more? The effect of de jure capital controls on trade misinvoicing," The World Economy, Wiley Blackwell, vol. 46(7), pages 2157-2186, July.
    19. Mascagni, Giulia & Molla, Kiflu & Mengistu, Andualem, 2021. "Trade Tax Evasion and the Tax Rate: Evidence from Transaction-level Trade Data," Working Papers 16548, Institute of Development Studies, International Centre for Tax and Development.
    20. Antoine Bouët & Devesh Roy, 2012. "Trade protection and tax evasion: Evidence from Kenya, Mauritius, and Nigeria," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(2), pages 287-320, April.

    More about this item

    Keywords

    e-invoicing; digitalization; international trade; VAT fraud; trade gap;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_10227. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.