Missing trader intra-community and carousel vat frauds - ECJ and ECtHR case law

Abstract

This paper explains what missing trader intra-Community and carousel frauds are and how they are performed. A fault in taxing intra-Community supplies with value added tax (VAT) enables these frauds to take place. Member States and the European Commission are aware of the fault but are unable to agree on how to change the taxation of the mentioned supplies. Therefore, the fight against these frauds is conducted by improving tax inspection, tax cooperation between Member States, imposing liability on persons participating in the transactions in which these frauds occur, and disallowing the deduction of input VAT. The European Court of Justice and the European Court of Human Rights have dealt with liability and deduction cases. They have decided that closing the tax gap by recovering VAT from persons participating in the transactions is legal if it is done in accordance with the so-called knowledge test.