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Digitalization and cross-border tax fraud: evidence from e-invoicing in Italy

Author

Listed:
  • Marwin Heinemann

    (Berlin School of Economics and Law (HWR Berlin)
    Free University Berlin)

  • Wojciech Stiller

    (Berlin School of Economics and Law (HWR Berlin))

Abstract

The digitalization of transaction processes through tools such as electronic invoicing (e-invoicing) aims to improve tax compliance and reduce administrative costs. Another important aspect of digitalization is its potential to reduce tax fraud. We exploit the comprehensive introduction of e-invoicing in Italy in 2019 and examine the effect of increased domestic tax enforcement capabilities on cross-border value-added tax (VAT) fraud. As a proxy for this fraud, we make use of the discrepancy in trade data that are double-reported in both the importing and exporting country (trade data gap, TDG). We calculate the TDG for imports to Italy from all other EU countries at the most detailed product level. Our results suggest a significant decline in cross-border fraud in response to the introduction of mandatory e-invoicing, providing an important rationale for the application of this measure by other countries. Furthermore, we estimate that e-invoicing decreased the Italian VAT loss in 2019 by about € 2.2 billion to € 2.6 billion compared to 2018. In this context, we underpin the suitability of the TDG as an approach for the study of anti-fraud measures.

Suggested Citation

  • Marwin Heinemann & Wojciech Stiller, 2025. "Digitalization and cross-border tax fraud: evidence from e-invoicing in Italy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(1), pages 195-237, February.
    • Handle: RePEc:kap:itaxpf:v:32:y:2025:i:1:d:10.1007_s10797-023-09820-x
    DOI: 10.1007/s10797-023-09820-x
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    More about this item

    Keywords

    E-Invoicing; Digitalization; International trade; VAT fraud; Trade data gap; Tax enforcement; Reverse charge;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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