Economic crime report 2004 - Ekobrottsmyndigheten

VAT Fraud
There is always a risk that output VAT will not be reported as required or
that improper deductions will be claimed for ingoing VAT.
VAT fraud can be committed in four basic ways.
• A transaction is not declared and no VAT payment is made. As a
result, no income tax is paid for any profit associated with the transaction.
Nor is any selective purchase tax collected.
• VAT is declared but not paid, a frequent occurrence when bankruptcies
are being planned.
• Based on false grounds, excess input VAT is declared so as to extort
tax revenue from the state.
• Goods are smuggled into Sweden from non-EU countries in order
to sell them without having to pay income tax on the proceeds. As a
result, no VAT is paid either.
Both criminological research and government agencies in their daily work
are highly familiar with the fraudulent methods employed in connection
with VAT. Nevertheless, there is no doubt that attempts by the agencies
to monitor such fraud have given rise to new methods.
No reliable estimate is available as to the scope of VAT fraud. Consumers
often fail to consider the issue when they purchase a good or service that
is “exempt from VAT” at an unreasonably low price. Furthermore, competition
becomes distorted when some businesses can offer lower prices
than their rivals by virtue of not paying VAT. That has a ripple effect in
that companies may turn to crime in order to survive.
A special type of evasion, involving “missing traders,” has raised a great
deal of concern within the EU. Also involving VAT carousel fraud, such
activities have risen to a totally unacceptable level in countries like Britain
and Germany. As a result, the European Commission undertook a special
project to combat this type of VAT evasion.
According to EU’s basic treaties, the Member States share the responsibility
of monitoring harmonized indirect taxes. Analyses conducted in some
EU countries suggest that uncollected revenues may exceed 15% of the
taxable base.
The final report of the Commission’s project concluded that VAT carousel
fraud would continue to pose a risk for the foreseeable future. Despite
indications that Sweden is no longer always the country that suffers the
loss of tax revenue, it remains one station through which the carousels
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