Value-Added Tax Fraud

European value-added tax (VAT) fraud is growing exponentially, both in degree and in level of cultivation, to the point that it is adversely affecting the accuracy of trade statistics of member states of the Organisation for Economic Co-operation and Development (OECD). Although estimates of VAT losses vary, the International VAT Association brackets losses from 60 billion to 100 billion euros per annum for all member states. Whatever the actual quantum of fraud, the general amount of these losses indicates the urgent need for proactive reform of the European Union (EU) VAT system and for arresting the growth and influence of the “black,” or underground, economy.

Value added can be defined as the market value of a firm's outputs less the inputs bought from others. At each ...