VAT compliance gap due to Missing Trader Intra-Community (MTIC) fraud : final report; Phase II

A specific form of VAT non-compliance in the EU that warrants particular attention is missing trader fraud. This scheme involves a fraudulent trader supplying goods and services to other businesses, collecting the tax due on the supply, and then disappearing without remitting it to the tax authorities. The European Commission defines a missing trader as "a trader registered as a taxable person for VAT purposes who, potentially with fraudulent intent, acquires or purports to acquire goods or services without payment of VAT and supplies goods and services with VAT but does not remit the VAT due to the appropriate national authority".1 This type of fraud can occur in relation to various taxes and transactions, as the circumstances in which tax is not paid and the trader disappears can be highly profitable. Missing Trader Intra-Community (MTIC) fraud is a particular type of VAT fraud that exploits the fact that the intra-Community movement of goods and services is VAT-free, making the fraud even more profitable. There is broad consensus in the literature that the revenue lost due to MTIC fraud in recent years has been responsible for a significant portion of the overall VAT compliance gap, i.e., VAT revenue lost due to failure to meet legal obligations.