EU VAT fraud may be far bigger than assumed, EPPO warns
European prosecutors say organised VAT and customs fraud is exposing a much larger criminal economy than traditional VAT Gap estimates suggest.
The European Public Prosecutor’s Office (EPPO) has warned that fraud could account for a significantly larger share of Europe’s missing VAT revenues than previously assumed.
Andrea Venegoni of the EPPO told the European Parliament on 7 September that its investigations were uncovering what he described as a new “continent of crime”, with organised criminal groups increasingly targeting weaknesses in the EU’s VAT and customs systems.
At the end of 2025, EPPO had 981 active VAT and customs fraud investigations involving estimated losses of €45 billion to EU and national budgets.
Revenue fraud represented just 27% of EPPO’s active investigations but accounted for 67% of the estimated financial damage across its entire caseload.
Other reports of VAT fraud being more of the VAT Gap have been made in the past.
VAT Gap may conceal much more organised fraud
This matters because the EU VAT Gap is not itself an estimate of VAT fraud.
The European Commission estimated the 2023 VAT compliance gap at €128 billion, or 9.5% of VAT theoretically due. But that figure includes everything from fraud and deliberate evasion through to insolvencies, errors and other forms of non-compliance.
Historically, therefore, only part of the VAT Gap has been attributed directly to organised fraud.
The Commission’s work on Missing Trader Intra-Community, or carousel, fraud has estimated annual losses of between €12.5 billion and €32.8 billion during 2010 to 2023.
EPPO is now effectively challenging whether those established assumptions capture the true scale of criminal activity.
There is an important caveat. Its €45 billion figure covers VAT and customs fraud combined, and relates to a stock of active investigations involving suspected offences accumulated over several years. It therefore cannot simply be compared with the EU’s annual VAT Gap.
E-invoicing becomes an anti-fraud infrastructure
The findings strengthen the case for the EU’s accelerating shift towards transactional tax controls.
Domestic e-invoicing regimes such as Italy’s SdI and Poland’s KSeF give tax authorities much earlier access to invoice-level information. ViDA will ultimately extend digital reporting across intra-EU B2B transactions, giving administrations considerably better opportunities to match seller and purchaser data across borders.
That is particularly relevant to carousel and missing-trader fraud, where speed matters. Fraud networks can move goods, generate VAT liabilities and disappear long before conventional VAT returns expose the mismatch.
But e-invoicing is not by itself a fraud solution. Criminal networks can issue perfectly formatted electronic invoices too.
The larger prize is the combination of:
- ViDA structured e-invoice data;
- near-real-time reporting;
- VAT number validation;
- customs information; and
- cross-border analytics.
If EPPO is right that organised fraud represents a larger part of Europe’s VAT losses than previously believed, the EU’s digital VAT reforms are becoming more than a compliance modernisation programme.
