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Review of Law & Economics

Editor-in-Chief: Parisi, Francesco

Ed. by Cooter, Robert D. / Gómez Pomar, Fernando / Kornhauser, Lewis A. / Parchomovsky, Gideon / Engel, Christoph

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CiteScore 2017: 0.30

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Source Normalized Impact per Paper (SNIP) 2017: 0.410

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Volume 13, Issue 2


An Assessment of Carousel Value-Added Tax Fraud in The European Carbon Market

Maria Berrittella
  • Corresponding author
  • Dipartimento di Scienze Economiche, Aziendali e Statistiche, Università degli Studi di Palermo, Palermo, Italy
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/ Filippo Alessandro Cimino
Published Online: 2017-04-08 | DOI: https://doi.org/10.1515/rle-2014-0023


The literature on the European Union Emission Trading System (EU ETS) is by now very rich. Much is known about the efficiency, the effectiveness, and the environmental and distributional impacts of the EU ETS. Less, however, is known about the carousel value-added-tax (VAT) fraud phenomena in the European carbon market. This article evaluates the welfare effects of carousel VAT fraud in the EU ETS using a computable general equilibrium (CGE) analysis. According to our findings, if VAT fraud occurs in the EU ETS, the effects on welfare for the EU Member States are negative, with welfare loss significantly higher than the VAT fraud value. This article also discusses the reverse charge mechanism that EU Member States could adopt to reduce the VAT fraud phenomena in the European carbon market.

Keywords: computable general equilibrium modeling; emission trading; reverse charge; value-added tax fraud; welfare

JEL Classification: C68; H26; K34; Q58


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About the article

Published Online: 2017-04-08

Citation Information: Review of Law & Economics, Volume 13, Issue 2, 20140023, ISSN (Online) 1555-5879, DOI: https://doi.org/10.1515/rle-2014-0023.

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