Reducing VAT Fraud: The Role of Timely Monitoring and Information Exchange in Cross-Border Trade

• The study examines the effect of on-time monitoring and information exchange on VAT fraud.
• VAT is a key revenue source but vulnerable to fraud, especially in regions like the EU and Latin America.
• A difference-in-differences design using World Bank trade data was employed.
• Combining on-time monitoring of e-invoices and information exchange reduces the trade data gap by 5.2%.
• On-time monitoring alone reduces VAT fraud by 4.6%.
• Information exchange alone reduces VAT fraud by 2.5%.
• Policy enforcement in the VAT-collecting country is crucial for reducing cross-border VAT fraud.
• Findings are relevant for European policymakers aiming to combat VAT fraud with electronic surveillance.

Source: papers.ssrn.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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