Missing Trader Intra-Community (MTIC) fraud is one of the most damaging manifestations of financial crime, which exploits the EU’s Value Added Tax (VAT) rules governing cross-border trading. The essence of MTIC fraud is that the fraudsters sell goods or services from one Member State to another through a chain of linked companies, taking advantage of the fact that it is legitimate not to charge VAT on such cross-border transactions. At the stage when these transactions are conducted domestically within a Member State, VAT then becomes chargeable. However, instead of transferring this tax to the fiscal authorities, those behind the company responsible disappear with the tax collected from its customers.
This type of fraud is extremely lucrative and causes massive tax losses across EU Member States. An update to the “Study on the VAT Gap in the EU-28 Member States”, published in August 2016, reported that the VAT gap, which is the difference between expected tax receipts and the amounts actually collected, totalled approximately EUR 160 billion in 2014.
Whilst fraudsters can essentially use any commodity or service traded between the Member States to perpetrate their crimes, sectors which currently appear most susceptible are: