Carousel fraud in terms of price manipulation
| DOI | https://doi.org/10.1108/JFC-07-2021-0169 |
| Published date | 06 September 2021 |
| Date | 06 September 2021 |
| Pages | 1329-1340 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial crime |
| Author | Cecília Olexová,Milan Husťák,František Sudzina |
Carousel fraud in terms of price
manipulation
Cecília Olexov
a
Department of Management, University of Economics in Bratislava
Faculty of Business Economics in Košice, Košice, Slovakia
Milan Husťák
Regional Court in Košice, Košice, Slovakia, and
František Sudzina
Department of Materials and Production, Aalborg University
Faculty of Engineering and Science, Aalborg, Denmark and
Department of Systems Analysis, University of Economics Prague Faculty of
Informatics and Statistics, Praha, Czech Republic
Abstract
Purpose –The purposeof this paper is to analyse the effects of carouselfraud on the average price of goods,
as one of the negativeeconomic aspects of carousel fraud.
Design/methodology/approach –This paper is primarily based on the description of selected legal
cases and the modus operandi of carousel fraud, the analysis of legal texts (legislation and judgments of
courts) and the discussion,from the point of view of price manipulation.
Findings –The results of the analysis specify the negative impact of carousel fraud in the form of the
distortion of reported averageprices and suggest that the authorities should monitor usualor fair prices to
detect caseswhere there is a risk of carousel fraud.
Originality/value –This paper brings new insightinto the issue of carousel frauds by understanding the
principle of carouselfraud, the motives for it, and the possibilities for detectingthis type of tax fraud, which is
necessaryto prevent tax evasion and to preserve a state’s income.
Keywords Legal cases, Price manipulation, Carousel fraud, Usual price, Value added tax
Paper type Conceptual paper
1. Introduction
Carousel frauds are the most common and the most sophisticated type of tax fraud. These
frauds are “popular”among value added tax (VAT) payers because their complicated
structure makes it difficult for the financial authorities to detect them. Moreover, the Court
of Justice of the European Union (CJEU) case law has underminedthe efforts of EU Member
States to simplify what must be provided as evidence of carousel fraud, because the
involvement of each taxpayer must be investigated independently of the intentions of
the ther entities in a chain of transactions (the so-called Axel Kittel test, which is based on
the CJEU judgement in Kittel and Recolta Recycling; CJEU, 2016). There is a need for more
effective tools to combat carousel fraud, and professionals are, therefore, arguing about the
possibility of changing the VAT system in view of the wide-rangingnegative consequences
This work was supported by the Slovak Research and Development Agency under the contract
No. APVV-19–0124.
Carousel fraud
1329
Journalof Financial Crime
Vol.29 No. 4, 2022
pp. 1329-1340
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-07-2021-0169
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