Cost of the MTIC VAT Fraud for European Union Members

37 Pages Posted: 5 Apr 2016

See all articles by Marius Frunza

Marius Frunza

Schwarzthal Tech; Schwarzthal Kapital

Date Written: April 4, 2016


The Value Added Tax (VAT) fraud is one of the most endemic economic crimes within the European Union. Its most disruptive form, the Missing Trader Intra-Community (MTIC) scam represents a real threat for the further economic and fiscal integration of the Union. The aim of this paper is to explain the mechanisms and to assess the magnitude of the MTIC fraud based on macroeconomic data. A macroeconomic model using panel regression is developed in order to link the amount of VAT collected across the member countries to their respective trade gaps. Using this model the VAT gap is identified based on the difference between the theoretical VAT and the observed amounts. The results emphasize that the MTIC fraud alone accounts for almost 94 B€ in 2014 across the 28 Union members representing 0.67 % of Union's GDP.

Keywords: VAT, VAT fraud, MTIC, Carousel fraud, panel regression, VAT Gap, vanilla options

JEL Classification: C33

Suggested Citation

Frunza, Marius, Cost of the MTIC VAT Fraud for European Union Members (April 4, 2016). Available at SSRN: or

Marius Frunza (Contact Author)

Schwarzthal Tech ( email )

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