An Assessment of Carousel Value-Added Tax Fraud in The European Carbon Market

Berrittella Maria () and Cimino Filippo Alessandro ()
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Berrittella Maria: Dipartimento di Scienze Economiche, Aziendali e Statistiche, Università degli Studi di Palermo, Palermo, Italy
Cimino Filippo Alessandro: Università Kore di Enna, Enna, Italy

Review of Law & Economics, 2017, vol. 13, issue 2, 19

Abstract: The literature on the European Union Emission Trading System (EU ETS) is by now very rich. Much is known about the efficiency, the effectiveness, and the environmental and distributional impacts of the EU ETS. Less, however, is known about the carousel value-added-tax (VAT) fraud phenomena in the European carbon market. This article evaluates the welfare effects of carousel VAT fraud in the EU ETS using a computable general equilibrium (CGE) analysis. According to our findings, if VAT fraud occurs in the EU ETS, the effects on welfare for the EU Member States are negative, with welfare loss significantly higher than the VAT fraud value. This article also discusses the reverse charge mechanism that EU Member States could adopt to reduce the VAT fraud phenomena in the European carbon market.

Keywords: computable general equilibrium modeling; emission trading; reverse charge; value-added tax fraud; welfare (search for similar items in EconPapers)
JEL-codes: C68 H26 K34 Q58 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/rle-2014-0023

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