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Digital VAT Carousel Fraud: A New Boundary for Criminality

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Listed:
  • Fabrizio Borselli
  • Silvia Fedeli
  • Luisa Giuriato

Abstract

The paper analyses the first Value Added Tax (VAT) fraud on Voice over Internet Protocol, the Phuncards-Broker operation, which took place in Italy in 2005-2007. The scheme consists of a chain of frauds on e-services that represents an important evolution of the ""classic"" models of carousel fraud, showing the increasing vulnerabilities of the VAT systems. The authors explore the policy implications for tax authorities, looking at how changes in their strategies may tackle the incentives to participate in the fraud. We argue that, in the short term, information technology (IT) solutions might offer some of the best answers when effectively combined with reverse-charge, while, in the longer-term, an extension of the One-Stop-Shop system may represent a new hypothesis of VAT reform in an anti-fraud perspective.

Suggested Citation

  • Fabrizio Borselli & Silvia Fedeli & Luisa Giuriato, 2015. "Digital VAT Carousel Fraud: A New Boundary for Criminality," Working Papers in Public Economics 170, University of Rome La Sapienza, Department of Economics and Law.
    • Handle: RePEc:sap:wpaper:wp170
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    File URL: https://web.uniroma1.it/dip_ecodir/sites/default/files/wpapers/wp170.pdf
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    References listed on IDEAS

    as
    1. Hans-Werner Sinn & Andrea Gebauer & Rüdiger Parsche, 2004. "The Ifo Institute’s Model for Reducing VAT Fraud: Payment First, Refund Later," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 5(02), pages 30-34, October.
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    5. Anonymous, 2013. "Introduction to the Issue," Journal of Wine Economics, Cambridge University Press, vol. 8(3), pages 243-243, December.
    6. Sandmo, Agnar, 2005. "The Theory of Tax Evasion: A Retrospective View," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(4), pages 643-663, December.
    7. Sijbren Cnossen, 1998. "Global Trends and Issues in Value Added Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 399-428, July.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Martin T. Braml & Gabriel J. Felbermayr, 2022. "The EU self-surplus puzzle: an indication of VAT fraud?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(5), pages 1075-1097, October.
    2. Riccardo Novaro & Massimiliano Piacenza & Gilberto Turati, 2022. "Does money laundering inflate residential house prices? Evidence from the Italian provincial markets," Kyklos, Wiley Blackwell, vol. 75(4), pages 672-691, November.
    3. Kudrle, Robert T., 2021. "Moves and countermoves in the digitization challenges to international taxation," Technology in Society, Elsevier, vol. 64(C).
    4. Silvia Fedeli & Luisa Giuriato, 2023. "Value added tax non‐compliance in the car market," Fiscal Studies, John Wiley & Sons, vol. 44(1), pages 85-104, March.
    5. Benjami Angles Juanpere, 2019. "Action Plan on VAT: Creating a Single VAT Area in the EU," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 7(1), pages 1-14.

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    More about this item

    Keywords

    EU Value added tax; VAT fraud; reverse-charge; One-Stop-Shop system;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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