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Organised VAT fraud: features, magnitude, policy perspectives

  • Fabrizio Borselli

    ()

    (Banca d'Italia)

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.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Questioni di Economia e Finanza (Occasional Papers) with number 106.

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Date of creation: Oct 2011
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Handle: RePEc:bdi:opques:qef_106_11
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Web page: http://www.bancaditalia.it

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  1. 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.
  2. Marius-Cristian Frunza & Dominique Guegan & Fabrice Thiebaut, 2010. "Missing trader fraud on the emissions market," Documents de travail du Centre d'Economie de la Sorbonne 10071, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  3. 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.
  4. Keen, Michael & Lockwood, Ben, 2006. "Is the VAT a Money Machine?," National Tax Journal, National Tax Association, vol. 59(4), pages 905-28, December.
  5. Stephen Smith & Michael Keen, 2007. "VAT Fraud and Evasion; What Do We Know, and What Can be Done?," IMF Working Papers 07/31, International Monetary Fund.
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