Missing Trader fraud, also known as MTIC fraud, and the closely-related carousel fraud are among the biggest problems facing the VAT system. HMRC estimates that the UK public purse loses up to £500 million each year because of them. Across Europe, losses to MTIC has sometimes been reported to be more than the total sum of the EU’s annual budget.
Missing Trader fraud occurs in several ways. A simple example is when a trader within the EU imports goods with a zero-rating for VAT purposes. He then sells the goods to another trader (or a customer) for a price plus VAT, but does not pay this VAT to the tax authorities.
In this example, the goods continue in circulation, but the VAT has disappeared from the system into the pocket of the fraudulent trader. Often, national tax authorities – each of whom has a separate, unconnected database – cannot detect and combat this kind of cross-border fraud.
