How to Combat Value-Added Tax Refund Fraud

This note concentrates on showing the insidious nature and extent of value-added tax refund fraud, which is equivalent to the theft of revenue from national treasuries.
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Volume/Issue: Volume 2023 Issue 001
Publication date: August 2023
ISBN: 9798400228728
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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Economics- Macroeconomics , Taxation - General , International Taxation , Economics / General , value-added tax , refund , fraud , strategies , cooperation , refund fraud , acquisition fraud scheme , return fraud , MTIC VAT Contra carousel scheme , Customs and Excise tax office case study , Tax refunds , Tax administration core functions , Middle East

Summary

A previous IMF Working Paper on value-added tax (VAT) refunds (WP/07/31, by Keen and Smith) describes the main forms of VAT noncompliance and concludes that VAT is susceptible to evasion and fraud like any other tax. This paper shows the insidious nature and extent of VAT refund fraud in selected EU countries and argues that this type of noncompliance requires tax administrations to adopt a coordinated strategy and deploy a range of countermeasures to combat this threat. Because such fraud is primarily a criminal legal issue, tackling it successfully will require cooperation, both internationally between VAT administrations and nationally between tax authorities and the judiciary. The paper’s focus is primarily on advanced economies in the context of the EU, but many of the recommendations are applicable to emerging market and developing countries. A separate IMF How to Note discusses managing VAT refunds in developing countries.