Tackle VAT fraud via more machine learning and predictive Artificial Intelligence
As governments around the world increasingly turn to artificial intelligence (AI) to combat VAT fraud, the European Parliament is calling for the European Union to accelerate its own AI-powered efforts to safeguard the EU budget, particularly in the fight against VAT fraud.
Last year, the EU Parliament Subcommittee on Tax matters also called for a tax on AI. Recently, countries like Romania and Greece have claimed major tax take rises thanks to early adoption of AI to predict likely lost revenues.
And you can see how we at VATCalc are already using it to generate AI VAT advice and item classification or tax codes to get the right taxing rates, country, exemptions and return reporting.
Parliament resolution backs AI
In a recent resolution passed with overwhelming support—473 votes in favor, 59 against, and 114 abstentions—MEPs warned that tech-savvy criminal networks continue to exploit weaknesses in VAT systems, posing a serious threat to the financial stability of the Union. This resolution underscores the growing consensus that conventional fraud detection methods are insufficient in the digital age, where VAT carousel fraud, missing trader fraud, and cross-border schemes can siphon billions from public coffers in a matter of days.
The European Parliament’s recommendations place AI-driven fraud detection technologies at the heart of the next wave of anti-fraud governance, calling on the European Commission to lead the development of a dedicated, EU-wide AI initiative focused on financial crime detection and prevention. Such systems would leverage machine learning, advanced analytics, and real-time transaction monitoring to flag suspicious patterns across borders and institutions—something manual audits can no longer handle at the scale and speed required.
This move echoes a global trend in tax enforcement, where countries such as Italy, Spain, France, and China are already deploying AI and data mining tools to detect VAT anomalies. For example, Italy’s Fattura Elettronica and Spain’s Immediate Supply of Information (SII) have successfully combined mandatory e-invoicing with AI algorithms to crack down on fraudulent supply chains and VAT refund fraud. Similarly, in Malta, the government recently reported that €400 million of additional tax revenue was collected using AI-driven systems designed to predict and prevent VAT evasion, demonstrating the tangible fiscal benefits of such technology.
VAT fraud main focus of EU tax fraud efforts
VAT fraud remains one of the EU’s most significant sources of revenue loss. The EU VAT Gap estimated member states lose €90m on missing revenues – although only a part is due to criminal activities.
MEPs reiterated their concerns over the current €10 million threshold that limits the European Public Prosecutor’s Office (EPPO) from initiating VAT fraud investigations. Critics argue that this high threshold creates loopholes, enabling fraudsters to strategically operate within Member States with weaker enforcement mechanisms, effectively staying below the EPPO’s radar.
To strengthen defenses, the Parliament is pressing for more agile, technology-driven cooperation between EU bodies such as the EPPO, OLAF, Europol, and national tax agencies. The resolution emphasizes that AI tools can serve as a shared intelligence layer, enabling these institutions to spot fraud schemes that cross national borders or exploit jurisdictional mismatches.
In 2023, the urgency for such measures was made clear when over 13,000 cases of fraud and irregularities were reported by EU and national authorities, amounting to €1.9 billion in losses—a year-on-year increase highlighting the persistent evolution of fraud tactics.
Beyond VAT, the resolution also calls for enhancing fund recovery mechanisms, strengthening governance over anti-fraud policies, and ensuring greater accountability in the protection of the EU’s financial interests.
As fraudsters become more sophisticated, lawmakers and tax authorities worldwide are recognizing that AI is no longer a futuristic tool but an essential component of modern tax enforcement. From predicting fraudulent behaviors to automating risk assessments, AI is quickly becoming the taxman’s most valuable ally. The EU’s latest resolution is a strong signal that Brussels intends to join global leaders in leveraging data-driven technologies to protect public funds and close long-standing VAT fraud loopholes.
