How Countries Are Cracking Down on VAT and GST Fraud in 2025

A Global Challenge in 2025

VAT and GSTGoods and Services Tax fraud continues to be a significant challenge for tax authorities worldwide. As fraudsters develop new schemes, governments respond with innovative solutions to close loopholes, improve compliance, and recover lost tax revenues. In 2025, several countries have introduced new legislation, adopted digital tools, and conducted high-profile enforcement actions to combat tax evasion.

New Legislation Targeting VAT/GST Fraud

Governments worldwide enact stronger laws to fight VAT/GST fraud and enhance compliance.

European Union: VAT in the Digital Age (ViDA)

The European Union has introduced the VAT in the Digital Age (ViDAViDA or 'VAT in the Digital Age', is an EU initiative proposed by the European Commission that seeks to modernise and harmonise VAT processes for member states, by embracing new technologies. It is aimed at updating processes for the management of VAT, and reduce the VAT gap and fraud. The proposal also aims to address challenges in the area of VAT raised by the development of the platform economy.) reform package, aimed at modernising VAT rules and combating fraud. Key measures include:

• Real-time digital reporting and e-invoicingElectronic invoicing - widely referred to as e-invoicing - is the exchange of a digital document between a supplier and a buyer. E-invoices are issued, transmitted and received in a structured data format that enabled automatic and electronic processing. They contain data in a machine-readable format so that an AP system can read an invoice without manual data entry, leading to faster and more efficient invoicing. for cross-border transactions.
• Liability for online platforms facilitating VAT transactions.
• Strengthened cooperation between EU tax authorities through Eurofisc.
• Central Electronic System of Payment Information (CESOP) to track e-commerce payments.

Germany, Spain & Hungary Strengthen VAT Controls

• Germany will mandate B2B e-invoicing from January 2025, reducing opportunities for fraudulent invoicing.
• Spain introduced enhanced VAT controls on energy products to prevent missing trader fraud.
• Hungary targets carousel fraud by zero-rating domestic gas trading to eliminate VAT fraud risks.

India’s GST Crackdown

India has ramped up its fight against GST fraud, uncovering ₹1.88 lakh crore ($22.5 billion) in tax evasion in 2024. The government is:

• Expanding e-invoicing requirements to more businesses.
• Using data analytics to detect fake GST registrations.
• Conducting nationwide raids on fraudulent tax refund claims.

Other Countries Implementing Digital Tax Reforms

Countries implementing digital tax reforms include:

• Turkey expanded its e-invoicing mandate to cover more businesses, including small and medium enterprises (SMEs). Additionally, the Turkish Revenue Administration has integrated AI-powered tax fraud detection into its digital tax system, allowing for real-time monitoring of transactions to flag potential VAT fraud.
• After a phased rollout, Vietnam officially extended its e-invoicing requirements to all businesses in 2025. The country also launched a real-time VAT reporting system to reduce tax evasion, aligning with regional efforts to modernise tax compliance.
• Malaysia has been rolling out e-invoicing in phases. As of January 1, 2025, businesses with an annual turnover between RM25 million and RM100 million must adopt e-invoicing. Subsequently, starting July 1, 2025, all other companies, except those with turnover less than RM500,000, must comply with e-invoicing requirements.

The Rise of Digital Tools: E-Invoicing, AI & Blockchain

E-Invoicing Mandates Expanding Globally

E-invoicing is proving to be a game-changer in combating VAT fraud:

• Italy has seen a 15.8% reduction in VAT fraud since adopting mandatory e-invoicing.
• Germany, France, and Poland are rolling out e-invoicing mandates in 2025 and 2026.
• India and Indonesia have expanded e-invoicing coverage to smaller firms.

Real-Time Reporting Systems

Real-time reporting allows tax authorities to track transactions instantly. Examples include:

• Spain’s SII System requires large taxpayers to report VAT data within days.
• Hungary’s Online Invoice System, detecting mismatches in VAT filings instantly.
• The EU’s upcoming ViDA digital reporting framework will be implemented across member states.

Blockchain & AI for Fraud Detection

Emerging technologies are helping tax authorities detect fraudulent transactions:

• China has launched a blockchain-based e-invoice system in major cities to prevent invoice fraud.
• Austria’s AI-powered Predictive Analytics Competence Center (PACC) uncovered a €195 million carousel fraud scheme in 2024.
• Turkey and France are deploying AI to detect tax anomalies and predict VAT fraud risks.

Enforcement Actions in 2024-2025

Governments are cracking down on large-scale VAT fraud networks.

EU: Coordinated VAT Fraud Busts

• Operation Admiral (2024): European prosecutors dismantled a €297 million VAT fraud scheme spanning 16 countries.
• Italy’s €520 million VAT fraud case (November 2024): Authorities arrested 47 suspects linked to carousel fraud involving the mafia.

Middle East, Asia, and Africa Enforcement Actions

• Malaysia and Indonesia targeted fraudulent VAT refund syndicates.
• Saudi Arabia penalised firms issuing fake invoices under its e-invoicing regime.
• Kenya and South Africa cracked down on VAT fraud linked to missing-vendor schemes.

Impact on Compliance

Closing the VAT Gap

• The EU’s VAT gapThe difference between the amount of VAT revenue due to a tax authority and the amount actually collected shrank from €99 billion in 2020 to €61 billion in 2021, though it rebounded to €89 billion in 2022.
• Italy credited e-invoicing with reducing its VAT gap and unlocking EU recovery funds.
• Spain and Hungary reported steady compliance gains due to real-time VAT reporting systems.

Increased Revenue Recovery

• India recovered ₹20,128 crore ($2.4 billion) in GST fraud cases between April and December 2024.
• Austria’s AI-driven audits identified an additional €185 million in VAT fraud in 2023.

Stronger Compliance Culture

• Expanding e-invoicing and real-time oversight have reduced tax fraud opportunities.
• AI-powered tax audits and blockchain tools are helping detect and prevent VAT evasion.

Conclusion

Governments worldwide are stepping up efforts to combat VAT and GST fraud through legislative changes, digital tax systems, and enhanced enforcement. Adopting e-invoicing, AI-driven analytics, and blockchain-based invoice verification is transforming the fight against tax fraud. While fraudsters continue to adapt, tax authorities are using cutting-edge technology and cross-border cooperation to stay ahead.

As these measures take hold, we expect to see narrower VAT gaps, higher revenue collection, and a more transparent global tax system in the coming years.

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