- Home >
- Services >
- Access to Knowledge >
- Trend Monitor >
- Domain of Application >
- Trend snippet: VAT fraudsters continue to generate multi-billion-euro profits in the EU
Trends in Security Information
The HSD Trendmonitor is designed to provide access to relevant content on various subjects in the safety and security domain, to identify relevant developments and to connect knowledge and organisations. The safety and security domain encompasses a vast number of subjects. Four relevant taxonomies (type of threat or opportunity, victim, source of threat and domain of application) have been constructed in order to visualize all of these subjects. The taxonomies and related category descriptions have been carefully composed according to other taxonomies, European and international standards and our own expertise.
In order to identify safety and security related trends, relevant reports and HSD news articles are continuously scanned, analysed and classified by hand according to the four taxonomies. This results in a wide array of observations, which we call ‘Trend Snippets’. Multiple Trend Snippets combined can provide insights into safety and security trends. The size of the circles shows the relative weight of the topic, the filters can be used to further select the most relevant content for you. If you have an addition, question or remark, drop us a line at info@securitydelta.nl.
visible on larger screens only
Please expand your browser window.
Or enjoy this interactive application on your desktop or laptop.
VAT fraudsters continue to generate multi-billion-euro profits in the EU
national and international markets and financial systems and support the growth of underground economies.
Value-added tax and missing trader intra community fraud Value-added tax (VAT) fraud consists of avoiding the payment of VAT or fraudulently claiming repayments of VAT from national authorities following an illicit chain of transactions. Missing trader intra community (MTIC) fraud is the abuse of the VAT system rules for cross-border transactions, involving the acquisition of goods (with ‘exemptions with the right to deduct’, also known as effective zero-rating) from another Member State which are then sold through a chain of companies to the consumer market with VAT added. The VAT is then not paid to the tax authorities. More complex cases of VAT fraud are known as carousel frauds. VAT fraudsters continue to generate multi-billion-euro profits in the EU. Up to EUR 50 billion are lost due to the activities of VAT fraudsters every year(37). By creating economic imbalances and market distortion, these criminal activities weaken the integrity of the national and international markets and financial systems and support the growth of underground economies.
Technology and digital infrastructure is an essential component in the commission of VAT fraud for different purposes. Criminal networks use technology to conceal their criminal activities, for example remote servers and repositories for data storage (including cloud data storage and servers located outside the EU), digital and alternative payment platforms, VPN services, encrypted communication and use of different internet-based smartphone communication applications. A developing area of fraud within the EU is Voice over Internet Protocol (VoIP) fraud, in which the internet is central to the scam. Criminal networks can now create and run companies from a single device, located in any country, and conduct trade and submit documentation online. Free software is also now available to manufacture fake invoices and bank statements. New methods of transferring money, such alternative banking platforms, together with electronic banking services, make it more difficult to identify perpetrators. Criminal networks are extremely adaptable and flexible in response to new measures and changes in legislation, the market/economic situation and law enforcement action. The fraudulent schemes of criminal networks are constantly evolving and improving in order to take advantage of the weaknesses of the state and legislation. For example, criminal networks are able to repurpose their supply chains easily to take advantage of opportunities for fraud from trading in new commodities and are similarly quick to refocus and change modus operandi (such as switching commodities or countries in response to legislative changes like VAT reversecharges). Criminals also take measures to avoid detection, such as substituting companies and frontmen, and exploiting new technological advances in order to incorporate companies and conceal ownership. The use of alternative banking platforms in carousel fraud and attempts to infiltrate the guarantees of origin markets are examples of the flexibility and adaptability of criminal networks active in this crime area. Criminal networks continue to exploit legal business structures to create fictitious commercial deals and use missing trader companies to avoid tax liabilities.
Criminal networks are often also active in moneylaundering activities to legalise their illicit proceeds; for some criminal networks, money laundering is a parallel activity to VAT fraud. Many criminal networks are involved in document fraud, most likely as part of the commission of VAT fraud. In cases where criminal networks were reported to be involved in other crime types, most often this related to other types of fraud. VAT fraud is committed by professionals possessing good knowledge of the VAT system, legislation and tax administration procedures. Other professionals providing expertise to criminal networks include legal advisors, customs officers, computer/ICT specialists, financial and economic experts, money-laundering experts, auditors and persons with knowledge of logistics. Setting up an MTIC fraud scheme in the intangible goods sector requires in-depth knowledge of that business and its regulations. Criminal networks may also recruit members with expertise in trading specific commodities such as VoIP.