the impact of missing trader intra-community fraud on trade statistics
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The Impact of Missing Trader Intra-Community Fraud on Trade Statistics. Sandra Tudor Head of Statistics and Analysis of Trade Unit. Missing Trader Intra-Community Fraud. Increasing problem since the introduction of the single market - PowerPoint PPT PresentationTRANSCRIPT
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The Impact of Missing Trader Intra-Community Fraud on
Trade Statistics
Sandra TudorHead of Statistics and Analysis of Trade Unit
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• Increasing problem since the introduction of the single market
• Takes advantage of VAT system, where goods are zero rated on transactions between EU Member States
• Missing traders charge for VAT on sales but do not pay the tax to government
Missing Trader Intra-Community Fraud
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A Simple MTIC carousel model2 countries
£ 950,000 + VAT£ 950,000 + VAT
(‘A’)EU
Supplier
(‘B’)UK Missing
Trader
(‘C’)UK Buffer
Trader
£900,000 + VAT£900,000 + VAT
(‘D’)UK Buffer
Trader£ 920,000 + VAT£ 920,000 + VAT
(‘E’)UK Broker
Tax Loss - £157,500Tax Loss - £157,500
£970,000 - VAT Nil£970,000 - VAT Nil £1,000,000 - VAT Nil£1,000,000 - VAT Nil
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Media headlines, 2002-2003
UK growth
revised up as
deficit shrinksFT Dec 2002
Fraud cases up, financial losses downThe Register, July 2003
Two arrested
for £80m VAT
fraudBBC Sept 2003
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Original work for Balance of Payments
2002 - July 2003
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• Effect on Intrastat data collection– Exports are captured, Imports are not
• Correct treatment is to increase imports
• Increasing imports worsens – Balance of Trade– Current Account deficit
• Goods are usually high value/low mass
• No estimate of acquisition fraud
Impact on Trade Statistics
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The adjustments
• UK’s methodology includes information uncovered by Customs operational activity
• The estimates were corroborated by:–national estimates of VAT loss– reduced EU trade asymmetries –smaller imbalances in the relevant
products in the ONS annual supply and use analysis
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Next StepsAugust 2003 to Feb 2005
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Project 2
• Reviewed methodology
• Looked at Acquisition Fraud
• Arranged to include the estimates in the Overseas Trade Statistics
• Compared data sources:– Arrivals, ESL purchases, VAT declarations– Dispatches, ESL sales, VAT declarations
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Project 2
• Investigated how best to incorporate the adjustments for 1999 – 2004 into HMRC’s Overseas Trade Statistics–Uses 3 month rolling average
• Second joint article published Feb 2005
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Further developmentsNon-EU trade
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MTIC carousel model, with non EU
(‘A’)EU
Supplier
(‘B’)UK Missing
Trader
(‘C’)UK Buffer
Trader
£900,000 + VAT£900,000 + VAT
(‘D’)UK Buffer
Trader£ 920,000 + VAT£ 920,000 + VAT
(‘E’)UK Broker
£ 950,000 + VAT£ 950,000 + VAT
Tax Loss - £157,500Tax Loss - £157,500
£970,000 - VAT Nil£970,000 - VAT Nil £1,000,000 - VAT Nil£1,000,000 - VAT Nil
(‘F’)non EU Trader
(‘G’)EU Trader
(‘H’)EU Trader
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Third Project
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Estimates of missing trade (EU arrivals)
Year Estimate (£bn) 1999 1.72000 2.82001 7.22002 11.42003 4.42004 32005 11.5
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Asymmetry between UK arrivals and rest of EU dispatches (£bn), 1992 - 2005
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
UK arr +MTIC
EU disp
UK arr
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New Issues
• Non-EU countries involved in chains
• Scale of revisions
• Reverse charging
• Identifying turning points
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Media headlines, 2006
Fears over fraud
as VAT receipts
slumpGuardian April 2006
Customs officers foil VAT fraudBBC news Sept 2006
VAT criminals
may force tax
rises as scams
near £30bn
Guardian July 2006
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• We continue to produce monthly estimates of the impact of the fraud for the OTS, BoP and Eurostat trade data
• We monitor changes in the pattern of trade –commodity–country
Ongoing work
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• Need to continually monitor changes
• Close links between SATU and Customs important
• Conflicting requirements
• Use of a range of data
Lessons Learnt
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If you want more information please contact:[email protected]@hmrc.gsi.gov.uk