VAT Missing Trader IntraCommunity MTIC fraud and Trade

Simple MTIC fraud (‘A’) EU Supplier £ 1, 000 - VAT Nil (‘B’) UK

Simple MTIC fraud (‘A’) EU Supplier £ 1, 000 - VAT Nil Tax Loss

Simple MTIC fraud (‘A’) EU Supplier (‘E’) UK Broker £ 1, 000 - VAT

Simple MTIC fraud £ 970, 000 - VAT Nil £ 1, 000 - VAT

Impact on statistics • Effect on Intrastat data collection – Exports are captured; Imports

The scale of the problem in UK £ billion • • • 1999 2000

Quality of fraud adjustments • Estimations include information uncovered by Customs operational activity •

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

Future Work • Continue to monitor MTIC activity • Compare ESL information – –

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VAT Missing Trader Intra-Community (MTIC) fraud and Trade Statistics David Ruffles Office for National Statistics London

Simple MTIC fraud (‘A’) EU Supplier £ 1, 000 - VAT Nil (‘B’) UK Missing Trader

Simple MTIC fraud (‘A’) EU Supplier £ 1, 000 - VAT Nil Tax Loss - £ 157, 500 (‘B’) UK Missing Trader £ 900, 000 + VAT (‘C’) UK Buffer Trader

Simple MTIC fraud (‘A’) EU Supplier £ 1, 000 - VAT Nil Tax Loss - £ 157, 500 (‘B’) UK Missing Trader £ 900, 000 + VAT (‘D’) UK Buffer Trader £ 920, 000 + VAT (‘C’) UK Buffer Trader

Simple MTIC fraud (‘A’) EU Supplier (‘E’) UK Broker £ 1, 000 - VAT Nil Tax Loss - £ 157, 500 (‘B’) UK Missing Trader £ 900, 000 + VAT £ 950, 000 + VAT (‘D’) UK Buffer Trader £ 920, 000 + VAT (‘C’) UK Buffer Trader

Simple MTIC fraud £ 970, 000 - VAT Nil £ 1, 000 - VAT Nil (‘A’) EU Supplier (‘E’) UK Broker Tax Loss - £ 157, 500 (‘B’) UK Missing Trader £ 900, 000 + VAT £ 950, 000 + VAT (‘D’) UK Buffer Trader £ 920, 000 + VAT (‘C’) UK Buffer Trader

Impact on statistics • Effect on Intrastat data collection – Exports are captured; Imports are not • Increasing imports worsens – Balance of Trade and Current Account Deficit • ESA 95/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

The scale of the problem in UK £ billion • • • 1999 2000 2001 2002 2003 1. 7 2. 8 7. 1 11. 5 4. 3 % of imports of goods & services 0. 7 1. 0 2. 4 3. 8 1. 4

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

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

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)