The Value Added Tax, or VAT, is a consumption tax assessed on the value added to goods and services. In countries that apply it, like the European countries, consumers pay the VAT tax every time they buy a product or service. It is a very important source of income: France, for example levies more than 200 billion of euros with the VAT tax. That is two times what French citizens pay in income tax.
Contrary to sales taxes, that are paid and calculated once, VAT taxes involve a lot of paperwork as each company has to keep track of it when it makes a transaction. Regardless of whether it is dealing with a simple consumer of with another business.
The VAT tax is complex and costs a lot of money. It is no surprise that fraudsters are trying to take advantage of this, particularly in Europe where it is called “carousel fraud.”
In 2018 , the European Anti-Fraud Office (OLAF) arrested eight criminals running a highly sophisticated carousel fraud scheme designed to avoid VAT duties in several countries across the EU. The amount of evaded VAT was estimated at around €30 million. Let’s see how the VAT criminals proceed.