MTIC VAT Fraud in EU Countries and Measures to Counter Them

Abstract

The article examines the questions of VAT fraud in crossborder trade. Purpose. To analyze missing trader intra-community (MTIC) VAC fraud in Europe. Research tasks. To provide brief theoretical analysis of VAT in international trade; to examine current problems in the cross-border VAT fraud and main strategies to counter them; to estimate the MTIC VAT gap in EU countries in 2013-2014. Methodology. Comparative and graphical analysis Results. We found that among analyzed countries Italy had the largest MTIC VAT gap. It could be explained inter alia by the existing annual VAT returns (instead monthly and quarterly returns), which substantially complicates the process of quick detection of MTIC fraud. The significant increase of ratio of MTIC VAT gap to the VAT revenue was observed for the Czech Republic, which served as the main reason for fundamental changes in VAT reporting system in the country. Conclusion. The analysis of the theoretical background of VAT in cross-border trade in goods allowed us to determine both some main features related to the crossborder VAT fraud (organized crime, smuggling, money laundering and estimation problems) and measures to tackle them. We defined, based on the evaluation of current strategies aiming to reduce the possibilities of cross-border VAT fraud, the three main groups of such measures, notably, economic measures, institutional measures and procedural and technical measures.