MTIC Fraud Gap estimation

Estimation methodologies on Missing Trader Intra Community (MTIC) fraud

The concept of Tax Gaps Report III: MTIC Fraud Gap estimation methodologies

VAT is an important tax, contributing to about one fifth of total tax levied by Member States. Almost EUR 150 billion (the VAT Gap) or about 12% of the VAT is lost. Part of the VAT gap can be linked to VAT fraud and evasion.

The challenge for the Fiscalis Project Group on Tax Gap – subgroup VAT fraud estimation methodologies was how to identify the part of the VAT gap related to VAT fraud and evasion.

As VAT fraud and evasion can be committed in various ways the scope of the exercise was limited to the Missing Trader Intra Community (MTIC) fraud.

The Report explains the mechanism of VAT fraud; describes the VAT fraud types, insisting on the MTIC fraud; reviews the MTIC fraud literature; describes VAT fraud estimation methodologies; lists the possible data sources for the estimation of VAT fraud and; reflects on the possibility of a European approach.

The report is the third one in a series and was preceded by the reports "The Concept of Tax Gaps – Report on VAT Gap Estimations" and "The Concept of Tax Gaps - Report II: Corporate Income Tax Gap Estimation Methodologies".