Transaction Analysis- A mechanism to detect and prevent VAT-fraud in the European Emissions Trading System (EU ETS)

Abstract

The European Emissions Trading System (EU ETS) has been shown vulnerable to VAT-fraud. Due to the introduction of the Reverse-Charge-Procedure in the majority of EU Member States (MS), VAT-fraud has reduced significantly. Nevertheless, remaining VAT-fraud patterns need to be detected in the transactions in order to support investigation bodies. On the basis of the Belgium software REMa the National administrators of Germany, France and United Kingdom have developed a method to detect VAT-fraud, called Transaction Analysis. This method is explained. Transaction Analysis has been validated against historical data.