VAT Fraud 'Industrialised' Across Europe as EPPO Reports Estimated €45 Billion Loss

Corporate records and judicial data indicate a troubling surge in financial crime across the European Union, where value-added tax (VAT) fraud has become the primary driver of economic loss. According to the latest annual report from the European Public Prosecutor’s Office (EPPO), VAT fraud now accounts for 67% of estimated losses at the European level, with total damages reaching approximately €45 billion. The report highlights a shift in criminal behaviour, suggesting that economic fraud is being "industrialised" by sophisticated networks.

Background and Context

The EPPO, the EU’s independent fraud investigation body based in Luxembourg, has observed a decisive trend over the past two years. While the number of investigations into subsidy fraud remains higher—constituting about 68% of cases—the financial damage inflicted by VAT and customs duty fraud has far exceeded initial expectations. The office currently manages around 980 VAT-related cases, a figure that represents only the most significant transnational crimes due to jurisdictional thresholds.

Under current regulations, the EPPO only exercises jurisdiction when fraud involves at least two member states and results in a loss exceeding €10 million. Consequently, the cases investigated represent the apex of a larger pyramid of illicit financial activity. Gabriel Seixas, the European prosecutor for Luxembourg, noted in an interview with Virgule that the rise in VAT fraud has overtaken other categories, including fraud linked to public contracts, confirming a clear escalation in fiscal criminality.

Key Figures and Entities

The investigation highlights the role of organized crime groups rather than isolated actors. According to the EPPO, criminal organisations are the primary engines behind the surge in VAT fraud, often integrating these operations with money laundering networks to create a self-perpetuating cycle of profit. In one instance cited by investigators, intercepted communications revealed a mafia member instructing accomplices to evade the EPPO, acknowledging the agency’s capacity for cross-border coordination.

In Luxembourg, the scale of operations is significant. The Grand Duchy currently hosts 32 active EPPO cases involving an estimated loss of around €1.4 billion. This marks a sharp increase from the previous year's 18 cases. Key local entities under scrutiny include electronic payment institutions and online marketplaces, which, due to the country's status as a financial centre, frequently appear in cross-border investigations. The Luxembourg authorities, specifically the Registration Duties, Estates and VAT Authority (AED), are noted as cooperating closely with European prosecutors to mitigate these risks.

Legal and Financial Mechanisms

The structural complexity of these frauds often involves "missing trader" or "carousel" frauds, where companies resell goods between several countries to evade VAT. Seixas confirmed that Luxembourg structures are implicated in such current cases. These mechanisms rely on the rapid movement of goods and invoices across borders to obscure the ultimate beneficiary and dissipate tax liabilities before authorities can intervene.

Once profits are generated, they are frequently laundered and reintroduced into the legal or illegal economy to finance further fraudulent activities. To combat this, the EPPO utilizes a coordinated structure across 24 member states, allowing for the real-time cross-checking of data. In Luxembourg, this involved executing 47 requests for assistance from other nations in the past year, treating these cross-border inquiries as parallel, joint investigations rather than mere administrative formalities.

International Implications and Policy Response

The escalation in cases poses a challenge to the EU’s enforcement capacity. In 2025, the EPPO opened 35% more investigations than in the previous year, yet the budget has not expanded to allow for additional staff recruitment. Seixas warned that without resources matching the scale of the ambition, the EU's ability to combat specialised criminal organisations remains constrained. VAT cases, in particular, are described as complex and time-consuming to dismantle.

The report also points to systemic gaps in detection and reporting. While private individuals report most fraud across the bloc, national authorities in Luxembourg have provided fewer reports relative to the volume of financial activity. Furthermore, the EPPO has highlighted a need for better internal protective procedures within European institutions to encourage whistleblowing without fear of reprisal. The office has urged police and administrative authorities to systematically check for European funding in public projects to improve transparency and detection rates.

Sources

This report draws on the annual report of the European Public Prosecutor’s Office, an interview with European prosecutor Gabriel Seixas published by Virgule, and public records regarding EU tax jurisdiction and fraud investigations.