The structure of intra-Community transactions as a fundamental source of abuse in the value-added tax system

The reliance on import documentation alone for intra-Community supply of goods (ICS) and intra-Community acquisition of goods (ICA), without any physical verification mechanisms, creates opportunities for abuse within the value-added tax (VAT) system. Typically, properly prepared documents, which serve as proof of fictitious delivery of goods, are exploited in VAT carousel schemes to fraudulently reclaim tax refunds. One potential approach to reforming this system is to replace the ICS and ICA framework with a taxation model based on the place where the transaction actually takes place.