Using artificial intelligence (AI) to combat VAT fraud, the European Parliament urges the European Union to expedite its AI initiatives to protect the EU budget, particularly in the fight against VAT-related fraud.
In a recent resolution, the European Parliament emphasized the urgent need to tackle VAT fraud. Members warned that criminal networks are exploiting weaknesses in VAT systems, threatening the financial stability of the European Union. The resolution highlights a growing agreement that traditional fraud detection methods are insufficient in today’s digital environment, where VAT carousel fraud and cross-border schemes can drain billions from public finances rapidly.
The European Parliament emphasizes the role of AI-based fraud detection in advancing anti-fraud governance. They call on the European Commission to lead an EU-wide initiative for financial crime prevention and detection, using machine learning and real-time transaction monitoring to identify suspicious patterns across borders—something traditional audits struggle to achieve effectively.
This EU resolution illustrates a wider global trend in tax enforcement, as countries like Italy, Spain, France, and China have begun using AI and data mining tools to identify VAT anomalies.
VAT fraud is a major challenge for revenue collection in the EU, with an estimated €90 billion lost due to the VAT Gap, partly due to non-criminal activities.
To combat this issue, the European Parliament is pushing for better, technology-driven cooperation among EU institutions like the EPPO, OLAF, Europol, and national tax agencies. They emphasize that AI tools can help detect cross-border fraud schemes.
In 2023, EU and national authorities reported over 13,000 cases of fraud, leading to €1.9 billion in losses—a year-on-year increase that reflects the evolving tactics of fraudsters.
As fraudsters become increasingly sophisticated, lawmakers and tax authorities worldwide recognize that AI is an essential tool for modern tax enforcement. AI helps predict fraud and automate risk assessments, making it a valuable ally for tax authorities. The EU's recent resolution emphasizes its commitment to leveraging data-driven technologies to protect public funds and address VAT fraud loopholes. By integrating AI into tax enforcement, the EU aims to enhance compliance and ensure the integrity of its financial systems.