 VAT Fraud and Evasion: What Do We Know, and What Can be Done?Stephen Smith and Michael Keen No 2007/031, IMF Working Papers from International Monetary Fund Abstract: Like any tax, the VAT is vulnerable to evasion and fraud. But its credit and refund mechanism does offer unique opportunities for abuse, and this has recently become an urgent concern in the European Union (EU). This paper describes the main forms of noncompliance distinctive to a VAT, considers how they can be addressed, and assesses evidence on their extent in high-income countries. While the practical significance of current difficulties in the EU should not be over-stated, administrative measures alone may prove insufficient to deal with them, and a fundamental redesign of the VAT treatment of intra-community trade required. The current difficulties in the EU largely reflect circumstances that would not apply in the United States. Keywords: WP; VAT gap; input VAT; evasion rate; registration threshold; VAT fraud; VAT revenue; value-added tax; sales tax; enforcement; compliance; noncompliance; audit; VAT chain; United Kingdom VAT gap; VAT noncompliance; firm D; VAT administration; VAT due; VAT accounts system; firm B; unit price; VAT productivity; Tax fraud; Consumption taxes; Income and capital gains taxes; Exports; Europe (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2007/031 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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