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Organised VAT fraud: features, magnitude, policy perspectives

Author

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  • Fabrizio Borselli

    () (Banca d'Italia)

Abstract

The European Union�s VAT system has become vulnerable to organised fraud schemes. In recent years, these schemes, undergoing a change in structure, have affected services and imports of goods from third countries and may also have shifted trade in goods among EU countries. Within the EU-27, organised VAT fraud is estimated to amount to between �20 billion and �35 billion a year. The EU institutions and Member States have put forward several measures to tackle this problem, although some of these have placed a disproportionate burden on businesses. The article shows that need to maximise the effectiveness of anti-VAT-fraud strategy cannot be separated from a broad view of the problem and of the functioning of the VAT system as a whole. A drastic change in the VAT system might provide a robust defence against fraud but produce uncertain effects. Enhancing risk management and exchange of good practices is essential. Technology-based solutions appear to be a pragmatic and politically feasible approach to new challenges, with good prospects of success.

Suggested Citation

  • Fabrizio Borselli, 2011. "Organised VAT fraud: features, magnitude, policy perspectives," Questioni di Economia e Finanza (Occasional Papers) 106, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_106_11
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    File URL: http://www.bancaditalia.it/pubblicazioni/qef/2011-0106/QEF_106.pdf
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    References listed on IDEAS

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    1. Marius-Cristian Frunza & Dominique Guegan & Fabrice Thiebaut, 2010. "Missing trader fraud on the emissions market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00523512, HAL.
    2. Keen, Michael & Smith, Stephen, 2006. "VAT Fraud and Evasion: What Do We Know and What Can Be Done?," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(4), pages 861-887, December.
    3. Keen, Michael & Lockwood, Ben, 2006. "Is the VAT a Money Machine?," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(4), pages 905-928, December.
    4. Friedrich Schneider, 2000. "Illegal Activities, but Still Value Added Ones (?): Size, Causes, and Measurement of the Shadow Economies all over the World," CESifo Working Paper Series 305, CESifo Group Munich.
    5. Chang Woon Nam & Rüdiger Parsche & Barbara Schaden, 2001. "Measurement of Value Added Tax Evasion in Selected EU Countries on the Basis of National Accounts Data," CESifo Working Paper Series 431, CESifo Group Munich.
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    Cited by:

    1. repec:eur:ejesjr:14 is not listed on IDEAS
    2. Jon Bakija & Ivan Badinski, 2014. "Evidence on the Responsiveness of Export-Related VAT Evasion to VAT Rates in the EU," Department of Economics Working Papers 2014-06, Department of Economics, Williams College.

    More about this item

    Keywords

    VAT; tax evasion; fraud;

    JEL classification:

    • 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

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