- Tax Risk Management: An Overview
- Why VAT is important
- Tax penalties can emerge in several scenarios if VAT regulations are overlooked
- VAT/GST risks
- VAT/GST rewards
- Key Trends in VAT Landscape
- E-invoicing and VAT a global trend
- Standard Audit Files for Tax and the Trend of Digital Tax Auditing
- Combating VAT Fraud Through Machine Learning and Predictive Artificial Intelligence
- VAT determination of incoming invoices
- Incorrect VAT numbers
VAT GST risks - Managing reputational risk
Page 6 of 7: Managing reputational risk
Managing reputational risk
Reputational risk is a key element in tax risk management, as it considers individual tax risk and how it may influence positions in other areas, negatively or positively. If a company is associated with unacceptable behavior, suppliers or vendors may choose to change contractual relationships, which could impact shareholders' value. Management's objective is to predict the mindset of the public opinion.
Progress and Future Challenges in the Fight Against VAT Fraud
European Parliamentary Research Service - Author: Pieter Baert
While significant strides have been made in the fight against VAT fraud, the journey ahead is fraught with challenges that require ongoing commitment and innovation. By enhancing cooperation, embracing technological advancements, and remaining alert to new tactics employed by fraudsters, the EU and its Member States can fortify their defenses and continue to protect public finances from VAT fraud.
Italy: Sistema di Intercambio (SDI)
Italy had for a long time one of the highest VAT gaps in the EU, amounting to about €35 billion in 2018. To counter the high levels of VAT fraud in the country, Italy in 2019 introduced the Sistema di Intercambio (SDI) exchange system for business-to-business transactions. Under this DRR, businesses must issue electronic invoices for such transactions and send them to the SDI platform, allowing the tax authorities to check the content. If there are no irregularities, the invoice is validated and sent to the customer, allowing tax authorities to have an overview of transactions and the VAT-trail almost in real-time. The SDI system was one of the first and most stringent electronic invoicing DRR frameworks in the EU, representing a highly advanced 'clearance' model, with a broad scope. SDI's introduction coincided with a notable reduction in Italy's VAT gap, which decreased from €35 billion to €16 billion between 2018 and 2022. While it is difficult to determine the precise impact of the SDI system alone, the timing suggests it likely played a considerable role in supporting this progress.
Admiral (I, II, III)
In April 2021, the Portuguese Tax Authorities launched an investigation into a local company specialising in the sale of electronic devices due to suspicions of VAT fraud. This initial investigation, later reported to EPPO, culminated into a large scale EU-wide operation, involving more than 200 searches (Investigation Admiral). With the support of Europol and national authorities, the operation unveiled the largest VAT carousel fraud network ever discovered in the EU, worth a staggering €2.2 billion. Based on the initial investigation, a subsequent series of searches and arrests were carried out in November 2024 (Admiral 2.0) across 16 countries to uncover another suspected VAT fraud network, raising the fraud damage to €2.9 billion. One month later, a new suspected fraud network was uncovered in Greece (Admiral 3.0), worth €38 million.
Moby Dick
A 2024 investigation – codenamed Moby Dick – led by the EPPO into suspected VAT carousel fraud, linked to Italian organised crime, resulted in the issuance of 43 arrests warrants and a €520 million freezing order. In Italy alone, 129 bank accounts were frozen, 44 luxury cars and boats, together with 192 real estate properties seized.
Silk Road
Europol, at several locations in Belgium. Four suspects were arrested who were believed to have been involved in a CP42 fraud ring, where goods were imported via Liege airport VAT-free under the pretence that the goods were destined for another Member State. The fraud ring is believed to have caused for up to €310 million in evaded taxes and duties.