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VAT Missing Trader Intra-Community (MTIC) fraud and Trade Statistics

David RufflesOffice for National Statistics

London

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Simple MTIC fraud

(‘A’)EU

Supplier

£1,000,000 - VAT Nil£1,000,000 - VAT Nil

(‘B’)UK Missing

Trader

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Simple MTIC fraud

(‘A’)EU

Supplier

£1,000,000 - VAT Nil£1,000,000 - VAT Nil

(‘B’)UK Missing

Trader

(‘C’)UK Buffer

Trader

£900,000 + VAT£900,000 + VAT

Tax Loss - £157,500Tax Loss - £157,500

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Simple MTIC fraud

(‘A’)EU

Supplier

£1,000,000 - VAT Nil£1,000,000 - VAT Nil

(‘B’)UK Missing

Trader

(‘C’)UK Buffer

Trader

£900,000 + VAT£900,000 + VAT

(‘D’)UK Buffer

Trader£ 920,000 + VAT£ 920,000 + VAT

Tax Loss - £157,500Tax Loss - £157,500

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Simple MTIC fraud

(‘A’)EU

Supplier

£1,000,000 - VAT Nil£1,000,000 - VAT Nil

(‘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

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Simple MTIC fraud

(‘A’)EU

Supplier

£1,000,000 - VAT Nil£1,000,000 - VAT Nil

(‘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

£970,000 - VAT Nil£970,000 - VAT Nil

Tax Loss - £157,500Tax Loss - £157,500

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• Effect on Intrastat data collection– Exports are captured; Imports are not

• Increasing imports worsens – Balance of Trade and Current Account Deficit

• ESA95/SNA say correct treatment is to increase imports– Affects Expenditure measure of GDP

• Estimates relate to carousel trade in mobile phones and computer components

• No estimate of carousel trade in other goods• No estimate of acquisition fraud

Impact on statistics

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The scale of the problem in UK

• £ billion % of imports of goods & services• 1999 1.7 0.7• 2000 2.8 1.0• 2001 7.1 2.4• 2002 11.5 3.8

• 2003 4.3 1.4

– With monthly profiles

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Quality of fraud adjustments

• Estimations include information uncovered by Customs operational activity

• They are corroborated by: - reduced EU trade asymmetries (UK trade data now more consistent with other countries’ data for their

trade within UK)- smaller imbalances in the relevant products in the

ONS annual supply and use analysis- smaller alignment adjustment in the quarterly national accounts

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Current Work

• Project Board investigating the impact of MTIC on UK Trade Statistics

• Research alternative methodologies, and whether acquisition fraud could be estimated

• Investigating the quality of European Sales List (ESL) data

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Future Work

• Continue to monitor MTIC activity

• Compare ESL information – – Arrivals, Other Member States ESL sales,

VAT declarations– Dispatches, ESL sales, VAT declarations

• Investigate how best to incorporate the adjustments into the Overseas Trade Statistics (OTS)