VAT. Carousel Fraud in European Union

  • Flavius-Bogdan Puie Faculty of Law, Babeș-Bolyai University, Cluj-Napoca
Keywords: EU financial resources, VAT and harmonization, Carousel fraud, reverse taxation, VAT Information Exchange System (VIES), Transaction Network Analysis (TNA), Split VAT, Electronic Clearance Procedure (Clearing House), Real Time Reporting, blockchain transactions, VAT coin, definitive VAT system


One hundred EUR in your pocket, but now it’s gone, stolen from you every year by criminals committing VAT fraud, taking advantage of a broken VAT system! Provided the calculations, 100 EUR times 500 million Europeans equals 50 billion EUR every year. That could have paid for lots of schools! How do the criminals do it? They set up shady companies to steal your tax money. They all disappear before authorities can catch them. It’s called VAT Carousel Fraud. The same goods go round and round like a carousel, more money is stolen and it’s happening to a great extent and, because of the current rules, it’s not really easy to catch the fraudsters. Some of these people have been caught, but this is just the tip of the iceberg. Criminals use your money to buy sport cars and villas, and they also may be used to fund other criminal and, perhaps, terrorist activities. The rules of the game need to change and that is what the European Union is doing: changing the EU VAT system so it could stop criminals in their tracks and put your money back in your pockets. In this paper, we propose to bring forward an analysis of the current VAT system at the EU level, explain the Carousel Fraud using a real case study and describe the solutions that EU is considering in order to combat this type of fraud.