1. FRAUD METHODS
1. Fictitious invoices/ double invoices

2. 2. Non-declared IC acquisitions
IC acquisitions not declared in the accounting books and declarations
Hijack Vat numbers
Traders use their Vat number to purchase goods which are for private use
Non declared purchases from persons not subject to VAT (e.g. farmers, doctors, lawyers) and VAT not paid

3. 3. Fictitious intra-Community supplies/ fictitious exports
Profit: € 0 Vat to pay
Trade on the black market
MEMBER STATE 2
Fictitious customer abroad
National trader
Domestic customer
MEMBER STATE 1

4. 4. The "simple" Missing Trader fraud
MEMBER STATE 2
Profit:
(€ 900+ Vat)- € € Vat
€ 1000
0 % Vat
Customer
Company B
“Missing trader”
Supplier
MEMBER STATE 1

5. 5. Missing trader intra-Community Fraud (MTIC fraud)- CAROUSEL FRAUD
Greek
Computer Parts
Distributor

6. CAROUSEL FRAUD (A) Greek Computer Parts Distributor (B) Italian
Company 1
“missing trader”
Zero-Rated Supply
€100,000

7. CAROUSEL FRAUD Tax Loss
Italian
Company 2
“Broker”
Taxed Supply
€95,000 +
€10,000 VAT
Reclaims Input Tax
(A)
Greek
Computer Parts
Distributor
(B)
Italian
Company 1
“missing trader”
Zero-Rated Supply
€100,000
Tax Loss

8. CAROUSEL FRAUD Tax Loss (‘C’) Italian Company 2 “Broker” Taxed Supply
€95,000 +
€10,000 VAT
Zero Rated Supply
€97,000
Reclaims Input Tax
(A)
Greek
Computer Parts
Distributor
(B)
Italian
Company 1
“missing trader”
Zero-Rated Supply
€100,000
Tax Loss

9. CAROUSEL FRAUD Buffer 2 Italian Company 2 “Broker” Buffer1 Company 1*
07/16/96
CAROUSEL FRAUD
Buffer2
Buffer 2
(C)
Italian
Company 2
“Broker”
Buffer1
(A)
Greek
Supplier
Company 1
“missing trader” * 1 7

10. CAROUSEL FRAUD The missing trader:
no real commercial activity, no VAT returns/zero VAT returns/no payment, Straw men, disappears quickly
The buffer:
normal trader between the missing trader and the broker, distorts the investigations

11. MTIC fraud
The broker:
Purchases from the buffers and supplies in the domestic market or in another member state. Claims VAT refunds/VAT deduction and can sell in low prices because of the fraud
The conduit company:
Declares IC supplies, claims VAT refunds, usually “in & out” company

12. Weaknesses Inherent to the VAT system
intra-community acquisitions of goods without payment of VAT
deduction of VAT with no condition tied to the payment by the supplier
In the control systems

13. Weaknesses Inherent to the VAT system In the control systems
Insufficient control at registration
Insufficient use of administrative cooperation
Difficult to detect carousel mechanism by applying normal risk analysis
The organisation of the tax administrations is often not adapted
Taxation effort too focussed on the missing trader (without any assets).