VAT carousel fraud, also known as Missing Trader Intra-Community (MTIC) fraud or simply missing trader fraud, is a form of tax fraud in the EU. This type of VAT fraud significantly reduces the revenues national governments need to provide public services.
Carousel fraud is conservatively estimated to make up one quarter of the overall uncollected VAT revenues (the ‘VAT Gap’) in the EU each year.
How is VAT carousel fraud committed?
VAT carousel fraud exploits the fact that VAT is currently not immediately applied to business-to-business (B2B) transactions of goods between EU Member States.
When a VAT registered trader buys goods from a business in another Member State, they do not pay VAT to the supplier. Meanwhile, suppliers selling across borders do not have to apply VAT on their sales and have the right to reclaim the VAT they have already paid.
Fraudsters can thus acquire goods free of VAT and resell them on the domestic market, inclusive of VAT and at a lower price than competitors. Fraud occurs when that VAT is not paid to national authorities. Fraudsters then often disappear, pocketing the collected VAT.
What is being done to tackle it?
A range of measures are in place to tackle VAT carousel fraud. These include enhanced administrative cooperation between EU Member States, transparency rules for payment service providers and a proposal for a new real-time digital reporting system based on e-invoicing as part of the VAT in the Digital Age package.
Learn more about the fight against VAT fraud