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An Assessment of Carousel Value-Added Tax Fraud in The European Carbon Market

Author

Listed:
  • Berrittella Maria

    (Dipartimento di Scienze Economiche, Aziendali e Statistiche, Università degli Studi di Palermo, Palermo, Italy)

  • Cimino Filippo Alessandro

    (Università Kore di Enna, Enna, Italy)

Abstract

The literature on the European Union Emission Trading System (EU ETS) is by now very rich. Much is known about the efficiency, the effectiveness, and the environmental and distributional impacts of the EU ETS. Less, however, is known about the carousel value-added-tax (VAT) fraud phenomena in the European carbon market. This article evaluates the welfare effects of carousel VAT fraud in the EU ETS using a computable general equilibrium (CGE) analysis. According to our findings, if VAT fraud occurs in the EU ETS, the effects on welfare for the EU Member States are negative, with welfare loss significantly higher than the VAT fraud value. This article also discusses the reverse charge mechanism that EU Member States could adopt to reduce the VAT fraud phenomena in the European carbon market.

Suggested Citation

  • Berrittella Maria & Cimino Filippo Alessandro, 2017. "An Assessment of Carousel Value-Added Tax Fraud in The European Carbon Market," Review of Law & Economics, De Gruyter, vol. 13(2), pages 1-19, July.
    • Handle: RePEc:bpj:rlecon:v:13:y:2017:i:2:p:19:n:2
    DOI: 10.1515/rle-2014-0023
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    References listed on IDEAS

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    More about this item

    Keywords

    computable general equilibrium modeling; emission trading; reverse charge; value-added tax fraud; welfare;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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