VAT Compliance Gap Due to Missing Trader Intra-Community (MTIC) Fraud

Missing Trader Intra-Community (MTIC) fraud is a prevalent form of VAT non-compliance in the European Union, which exploits the VAT-free status of intra-Community trade. Fraudsters perpetuating it perform a real or fictional intra-Community trade and then disappear without remitting VAT, leading to substantial revenue losses. Using a sophisticated methodology that includes the random forest machine learning algorithm and Intrastat mirror trade statistics, this report provides estimates of the MTIC gap from 2010 to 2023. Results indicate significant annual losses in VAT revenue, averaging between 12.5 billion € and 32.8 billion € across the whole EU (9.3 to 24.1 percent of the VAT compliance gap). The revenue loss as a percentage of VAT revenue appears relatively stable between 2010 and 2023, fluctuating between 0.9 and 1.4 percent for the lower estimates, and 2.3 and 3.4 percent for the upper estimates. Peaks were observed in 2012, 2018, and 2022. Despite limitations to the methodological approach taken, the patterns observed were often consistent with revealed cases of fraud and insights of consulted tax administrations with specific knowledge and access to taxpayer-level data. In addition, the potential alternative methodological approach based on matching VAT Information Exchange System (VIES) and VIES-like reporting obligations data available to member countries administrations appears promising for validating and refining the estimates presented in this report.