How to Combat Value-Added Tax Refund Fraud

IMF How To Notes, August 4, 2023

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How to Combat Value-Added Tax Refund Fraud

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Bibliographic details

• Authors: Cedric Andrew, Katherine Baer
• Published: August 4, 2023
• Series: IMF How To Notes
• DOI: https://doi.org/10.5089/9798400228728.061

Overview and central findings

• A previous IMF Working Paper on value-added tax (VAT) refunds (WP/07/31, by Keen and Smith) describes the main forms of VAT noncompliance and concludes that VAT is susceptible to evasion and fraud like any other tax.
• This paper documents the insidious nature and extent of VAT refund fraud in selected EU countries.
• VAT refund fraud requires tax administrations to adopt a coordinated strategy and deploy a range of countermeasures to combat the threat.
• Because such fraud is primarily a criminal legal issue, tackling it successfully will require cooperation:
  • internationally between VAT administrations, and
  • nationally between tax authorities and the judiciary.
• The paper’s focus is primarily on advanced economies in the context of the EU, but many of the recommendations are applicable to emerging market and developing countries.
• A separate IMF How to Note discusses managing VAT refunds in developing countries.

Policy recommendations and countermeasures

• Adopt a coordinated strategy within tax administrations to detect and prevent VAT refund fraud.
• Deploy a range of countermeasures tailored to the identified fraud typologies.
• Strengthen cooperation internationally between VAT administrations to address cross-border fraud schemes.
• Strengthen national cooperation between tax authorities and the judiciary, recognizing the criminal-legal dimension of refund fraud.
• Apply lessons and selected recommendations to emerging market and developing countries where relevant.

Scope and focus

• Primary focus: advanced economies in the context of the EU.
• Recommendations: broadly applicable to emerging market and developing countries.
• Related material: a separate IMF How to Note addresses managing VAT refunds in developing countries.

Subjects and keywords

• Subject: Crime, Economic sectors, Revenue administration, Tax administration core functions, Tax policy, Tax refunds, Taxes, Value-added tax
• Keywords: acquisition fraud scheme, cooperation, Customs and Excise tax office case study, fraud, Middle East, MTIC VAT Contra carousel scheme, refund, refund fraud, return fraud, strategies, Tax administration core functions, Tax refunds, value-added tax

How to Combat Value-Added Tax Refund Fraud, IMF How To Notes (2023), By Cedric Andrew and Katherine Baer.

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• How to Combat Value-Added Tax Refund Fraud
  • How to Combat Value-Added Tax Refund Fraud (Markdown version)
  • How to Combat Value-Added Tax Refund Fraud (PDF)