About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

34 Int'l Tax J. 31 (2008)
Third-Party Risks and Liabilities in Case of VAT Fraud in the EU

handle is hein.journals/intaxjo34 and id is 31 raw text is: January-February 2008 Third-Party Risks and Liabilities in Case of VAT Fraud in the EU By Robert F van Brederode 1. Introduction and Summary Dr. Robert F van Brederode is a tax lawyer concentrating in the area of indi- rect tax. A former partner at PwC, Dr. van Brederode is now in solo practice based in Connecticut. He may be reached at herrundhund@charter net. VAT fraud is an issue of growing concern for the tax authorities in EU countries, because of its size and frequency, the increased sophistication of the fraud schemes and inherent difficulty of combating it, and its financial significance. This article's focus is on the position of a third party, who somehow gets entangled into the myriad of transactions that form what is generally referred to as Carousel fraud. First, a basic description is provided of the design of a carousel fraud, then a closer look is taken to how some individual member states of the EU have tried to combat this type of fraud. Finally, the latest developments in case law of the European Court of Justice and the acceptance of the principle of abuse of law and of joint and several liability are discussed, especially the severe consequences these concepts have on the position of a third party entangled in such a fraud scheme but acting in good faith. 2. Description of Carousel Fraud From an economic perspective, the value added tax (VAT) as applied in the European Union (EU) is a consumption tax. It is charged at each stage of the production and distribution chain (output-VAT) but by allowing taxable traders a credit for tax paid on their purchases (input-VAT), the tax is in effect imposed on the final consumption of taxable goods and services. Under the destination principle, its aim is to tax domestic consumption only. In international transactions, therefore, border tax adjustments are required. In relation to third countries, imports will be subjected to domesticVAT when released into free circulation and exports should leave the countryVAT- free, which is realized by not charging output-VAT on the export sale while the trader retains its right of input-VAT credit. For intra-Community transactions1 02008 R.F. van Brederode INTERNATIONAL TAXJOURNAL

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most