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VAT fraud and reverse charge: empirical evidence from VAT return data

Author

Listed:
  • Thiess Buettner

    (Friedrich-Alexander-Universität Erlangen-Nürnberg)

  • Annalisa Tassi

    (Friedrich-Alexander-Universität Erlangen-Nürnberg)

Abstract

In order to stop Value-Added Tax (VAT) fraud, EU member states use the so-called reverse-charge (RC) mechanism, which effectively removes VAT withholding and refunding in business-to-business transactions. Using the German VAT return data, we examine the effects of the introduction of RC and find that requests of input tax refunding decline sharply in the affected industries, supporting the presence of fraud prior to the introduction of RC. Based on our estimates, we quantify the revenue losses from VAT fraud prior to RC implementation in these industries to be around 5% of VAT revenues.

Suggested Citation

  • Thiess Buettner & Annalisa Tassi, 2023. "VAT fraud and reverse charge: empirical evidence from VAT return data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(3), pages 849-878, June.
    • Handle: RePEc:kap:itaxpf:v:30:y:2023:i:3:d:10.1007_s10797-023-09776-y
    DOI: 10.1007/s10797-023-09776-y
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    Cited by:

    1. Stiller, Wojciech & Heinemann, Marwin, 2024. "Do more harm than good? The optional reverse charge mechanism against cross-border tax fraud," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 61-84.

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    More about this item

    Keywords

    Value-added tax; Reverse charge; Tax fraud; Missing-trader fraud;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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