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The digitalization of transaction processes through tools such as electronic invoicing (e-invoicing) aims to improve tax compliance and reduce administrative costs. Another important aspect of digitalization is its potential to reduce tax fraud. We exploit the comprehensive introduction of e-invoicing in Italy in 2019 and examine the effect of increased domestic tax enforcement capabilities on cross-border value-added tax (VAT) fraud. As a proxy for this fraud, we make use of the discrepancy in trade data that are double-reported in both the importing and exporting country (trade data gap, TDG). We calculate the TDG for imports to Italy from all other EU countries at the most detailed product level. Our results suggest a significant decline in cross-border fraud in response to the introduction of mandatory e-invoicing, providing an important rationale for the application of this measure by other countries. Furthermore, we estimate that e-invoicing decreased the Italian VAT loss in 2019 by about € 2.2 billion to € 2.6 billion compared to 2018. In this context, we underpin the suitability of the TDG as an approach for the study of anti-fraud measures.

The world runs a trade surplus with itself: the reported values of exports exceed the reported values of imports. This is logically impossible but a well-known empirical fact. Less well-known is the fact that, in recent years, the EU has a trade surplus with itself that amounts to more than 80% of the global surplus. In this paper, we show that this EU self-surplus is worth a striking 307 billion Euro in 2018, equaling 1.9% of the Union’s GDP, which persists both in goods and services trade accounts. We further examine discrepancies in goods and services trade accounts at the country and country pair level. These are strongest between neighboring countries and exist for members of the Euro Area as well as non-members. Around the 2004 Eastern Enlargement, the EU self-surplus quadrupled. Our estimations suggest that Cyprus, Ireland, Luxembourg, and Sweden are EU Members with the most inaccurate statistical regimes. We observe systematic biases which unlikely root in random measurement error. By contrast, we suspect that a large fraction of the EU’s self-surplus puzzle seems related to fraud in value added tax (VAT). VAT exemptions for exporters provide strong incentives for the over-declaration of true export values. The resulting loss in tax income could amount to as much as 64 billion Euro per year.

We study the effects of a reform to VAT rules (the reverse charge mechanism on domestic transactions) aimed at eliminating VAT fraud involving cross-border transactions within the European Union (EU). The EU VAT system is prone to fraud involving cross-border transactions between member states, whereby traders either collect VAT without rightfully remitting it to tax authorities or claim a VAT refund to which they are not entitled. We find that pre-reform fraud amounts to around 4% of the trade volume of treated products, or 0.1–0.2% of overall VAT revenues in reform countries in the year leading to the reform. We also show that fraud is concentrated in countries with higher corruption, lower customs efficiency, and lower GDP per capita. Our results represent a lower bound for the gains from local fraud removal, which appears similar in magnitude to the costs incurred by firms to comply with the reform.

Research background: Combating tax evasion is part of tax administration in most countries. As globalization progresses, tax evasion and tax fraud are growing. All this has a negative impact on tax revenues of state budgets. Globalization is helping to apply similar practices by states against tax evasion. Within the EU, it is mainly about harmonization and common procedures for VAT. Revenues from VAT are a significant revenue of the state budget also in the Czech Republic, therefore various tools are used in the constant fight against VAT fraud. Purpose of the article: The aim of the article is to evaluate the effectiveness of securing orders in the fight against VAT fraud in the Czech Republic. Methods: Data for the monitored period 2014 - 2018 were obtained from documents of the Financial Administration of the Czech Republic. The analysis of securing orders and the estimation of the costs of their issuance is performed based on the stated data. Subsequently, the effectiveness of issued securing orders in the monitored period is evaluated. Findings & Value added: In the context of globalization, a number of studies deal mainly with the causes and effects of tax arrears, tax evasion and the tax gap. This paper discusses the fight against tax evasion, focusing on a specific instrument - securing orders. Based on the analyzes, an estimate is made of the costs of issuing securing orders. Subsequently, the effectiveness of securing orders is evaluated as one of the instruments in the fight against VAT fraud.

The 2015 Hatton Garden Heist was described as the ‘largest burglary in English legal history’. However, the global attention that this spectacular crime attracted to ‘The Garden’ tended to concentrate upon the value of the stolen goods and the vintage of the burglars. What has been ignored is how the burglary shone a spotlight into Hatton Garden itself, as an area with a unique ‘upperworld’ commercial profile and skills cluster that we identify as an incubator and facilitator for organised crime. The Garden is the UK’s foremost jewellery production and retail centre and this paper seeks to explore how Hatton Garden’s businesses integrated with a fluid criminal population to transition, through hosting lucrative (and bureaucratically complex) VAT gold frauds from 1980 to the early 1990s, to become a major base for sophisticated acquisitive criminal activities. Based on extensive interviews over a thirty year period, evidence from a personal research archive and public records, this paper details a cultural community with a unique criminal profile due to the particularities of its geographical location, ethnic composition, trading culture, skills base and international connections. The processes and structures that facilitate criminal markets are largely under-researched (Antonopoulos et al. 2015: 11), and this paper considers how elements of Hatton Garden’s ‘upperworld’ businesses integrated with project criminals, displaced by policing strategies, to effect this transition.

This Insight analyses the so-called PIF Directive (i.e. Directive (EU) 2017/1371 of the European Parliament and the Council of 5 July 2017 on the fight against fraud to the Union's financial interests by means of criminal law). The aim of the PIF Directive is to strengthen the protection of the financial interests of the Union and to counter fraud and other illegal activities affecting them, as required by Art. 325 TFEU. Given the diverging national criminal rules concerning fraud and other illegal activities affecting the financial interests of the Union and the unfair divergence of sanctions among Member States, the Directive seeks particularly to achieve this objective by harmonising the definitions, sanctions and prescription periods of the offences affecting the Union's financial interests. The PIF Directive is furthermore strictly intertwined with the Regulation establishing the European Public Prosecutor's Office (\"EPPO\"), as the latter's material competence is defined by reference to the PIF Directive. In this context, it seems therefore particularly important to assess whether the objectives which the Directive sought to achieve have been fulfilled. To this purpose, it is first briefly examined the legal background and the legal basis by virtue of which the Directive is adopted (II), its scope of application and content (III), as well as its repercussion on the competence of the EPPO (IV). Finally, in the conclusion, are summarised the findings of the analysis.

The paper analyzes the VAT frauds issues in the European Union after the abolition of the internal customs. All the suggested solutions based on the origin principle create distortions in the “one market” and have a doubtful efficiency. The reverse-charge regime for all business to business transactions joint with VAT at the last stage also creates heavy discriminations. The current system based on the destination principle joint with ad hoc measures—such as specific reverse-charge, rebate and margin regime under evidence that VAT due has been paid, joint/several liability…—and a consistent information-exchange-system may provide a less distorting solution.

Kružne prijevare ili carousel fraud posebna su vrsta prijevare unutar Europske unije uz pomoć trgovca koji nestaje sa sljedećim temeljnim elementima: transakcije poduzeća u najmanje dvije države članice, veliki broj kupoprodajnih transakcija više poduzeća u kratkom razdoblju te najmanje jedan nestajući trgovac. Riječ je o posebnoj financijskoj prijevari kojom se oštećuje državni proračun zlouporabom sustava poreza na dodanu vrijednost te posljedično i proračun Europske unije. Ciljevi su rada analizirati dinamiku nastanka i razvitka kružnih prijevara proučavanjem razvoja sustava poreza na dodanu vrijednost u Europskoj uniji te utvrditi koja su tijela i na koji način uključena u njihovo suzbijanje, kao i utvrditi postoji li u Republici Hrvatskoj kaznena odgovornost za kružne prijevare. Stoga se u radu prvo kratko prikazuje povijesni razvoj poreza na dodanu vrijednost te se objašnjava tko je porezni obveznik i što je pretporez. Slijedi analiza regulacije poreza na dodanu vrijednost u pravu Europske unije i stjecanja dobara unutar Europske unije. Centralni dio rada bavi se: analizom temeljnih pojmova prijevare s porezom na dodanu vrijednost, razmatranjem obuhvaća li nacionalno kazneno djelo utaje poreza ili carine cjelokupni činjenični supstrat kružne prijevare, prikazom fenomenologije kružne prijevare iz slučajeva koje istražuje Ured europskog javnog tužitelja. Posljednji dio rada bavi se prikazom strukturalnih mehanizama radi suzbijanja kružnih prijevara, tijela EU-a koja sudjeluju u suzbijanju prijevara te alata kojima se države članice služe radi učinkovitijeg otkrivanja i istraga prijevara. U zaključku se na temelju prethodno iznesenog odgovara na pitanja postavljena u naslovu rada: zašto nastaju kružne prijevare i mogu li se učinkovito suzbiti.

U radu se obrađuje primjena Uredbe o europskom javnom tužitelju u kontekstu odnosa prema trenutačnom ustroju, radu, funkcioniranju i mogućnostima koje pruža Europol. U radu se prikazuje i širi kontekst s kojim se cjelokupna zajednica suočava u početku operativne primjene postupanja u skladu s Uredbom o Uredu EJT-a. Pod širim kontekstom podrazumijevaju se načelne aktivnosti koje provodi Hrvatska kao predsjedateljica EU-a u području financijskih istraga, izazovi koji su nastali izlaskom Ujedinjenog Kraljevstva iz EU-a, kao i postupak povodom definiranja višegodišnjega financijskog okvira EU-a za financijsko razdoblje 2021.- 2027. Ipak, u radu se u prvom redu razmatra odnos Ureda EJT-a i Europola: kako se i kojim sredstvima može ostvariti kvalitetna, brza i pouzdana razmjena podataka te koje su pravne pretpostavke za uspostavu i realizaciju takve suradnje. Rad je metodološki određen korištenjem komparativne metode u analizi pravnog okvira za uspostavu Ureda EJT-a te empirijske metode u dijelu koji se odnosi na rad, funkcioniranje i praktične aktivnosti koje poduzima Europol oko prilagodbe za punu primjenu postupanja u skladu s Uredom EJT-a. U odnosu na moguće izazove autor nudi konkretne prijedloge rješenja. Tako se primjerice u odnosu na razmjenu podataka između dva tijela predlaže korištenje sigurnog Europolova komunikacijskog kanala (SIENA). Nadalje, predlaže se korištenje mogućnosti koje nudi Europol kroz financiranje određenih aktivnosti Europolovim sredstvima, ali se upozorava i na moguće teškoće prilikom analitičke obrade podataka koju provodi Europol. U potonjem slučaju radi se, osim o mogućoj potkapacitiranosti Europola, i o pravnim nedoumicama, za koje autor ponovno nudi rješenje za korekciju kroz novelu odredaba Uredbe o Europolu. U zaključnim razmatranjima autor konstatira kako su pred Uredom EJT-a, Europolom i državama članicama veliki izazovi oko primjene novoga zakonodavstva EU-a usmjerenoga na jačanje suradnje u provedbi financijskih istraga. Kvalitetna obrada podataka moguća je kroz usmjereniju aktivnost svih sudionika, otvaranjem komunikacijskih aktivnosti i sinergijskim analitičkim djelovanjem.

We study events surrounding ChuoAoyama's failed audit of Kanebo, a large Japanese cosmetics company whose management engaged in a massive accounting fraud. ChuoAoyama was PwC's Japanese affiliate and one of Japan's largest audit firms. In May 2006, the Japanese Financial Services Agency (FSA) suspended ChuoAoyama for two months for its role in the Kanebo fraud. This unprecedented action followed a series of events that seriously damaged ChuoAoyama's reputation. We use these events to provide evidence on the importance of auditors' reputation for quality in a setting where litigation plays essentially no role. Around one quarter of ChuoAoyama's clients defected from the firm after its suspension, consistent with the importance of reputation. Larger firms and those with greater growth options were more likely to leave, also consistent with the reputation argument.