Tackling VAT Fraud: Thirteen Ways Forward

Abstract

In a May 31, 2006 Communication to the Council, the European Parliament, and the European Economic and Social Committee, the European Commission indicated a need to develop a coordinated strategy to improve the fight against fiscal fraud [COM (2006) 254 final]. Although the Communication considers fiscal fraud broadly (VAT, excise duties and direct taxes) the most pressing need seems to be for a VAT strategy that will effectively deal with carousel fraud.

This paper considers thirteen proposals that deal with missing trader intra-community fraud (MTIC):

(1) Common VAT (origin system) (2) Vanistendael’s foreign tax offices proposal (3) CVAT (Compensating VAT) (4) VIVAT (Variable Integrated VAT) (5) Dual VAT – HST version (6) Dual VAT – QST version (7) PVAT (Prepaid VAT) (8) Mittler Model (9) Reverse charge model – with input tax settlement (10) Reverse charge model – with joint and several liability (11) Pay first model – non-cash payment (trust account) (12) Pay first model – cash payment (tax stamp system) (13) Digital VAT – D-VAT

Keywords: Common VAT, Origin system, Vanistendael, CVAT, VIVAT, Dual VAT, PVAT, Mittler Model, Reverse charge, Pay first, Digital VAT, D-VAT

JEL Classification: H26, H29, K34