The EU self-surplus puzzle: an indication of VAT fraud?

The world runs a trade surplus with itself: the reported values of exports exceed the reported values of imports. This is logically impossible but a well-known empirical fact. Less well-known is the fact that, in recent years, the EU has a trade surplus with itself that amounts to more than 80% of the global surplus. In this paper, we show that this EU self-surplus is worth a striking 307 billion Euro in 2018, equaling 1.9% of the Union’s GDP, which persists both in goods and services trade accounts. We further examine discrepancies in goods and services trade accounts at the country and country pair level. These are strongest between neighboring countries and exist for members of the Euro Area as well as non-members. Around the 2004 Eastern Enlargement, the EU self-surplus quadrupled. Our estimations suggest that Cyprus, Ireland, Luxembourg, and Sweden are EU Members with the most inaccurate statistical regimes. We observe systematic biases which unlikely root in random measurement error. By contrast, we suspect that a large fraction of the EU’s self-surplus puzzle seems related to fraud in value added tax (VAT). VAT exemptions for exporters provide strong incentives for the over-declaration of true export values. The resulting loss in tax income could amount to as much as 64 billion Euro per year.

Goods and services trade will face disruptions in 2022

Headline INTERNATIONAL: Trade will face disruptions in 2022

Digital Services in International Trade Law

Digitisation has significantly impacted international trade. This book explains the impact of digitisation on trade in services, the ensuing concept of 'digital services' and the different types of trade barriers these services face. This book establishes that the legal framework that applies to trade in services also applies to digital services. It elaborates on the scope of the General Agreement on Trade in Services (GATS) and how to classify digital services. The relevant GATS obligations are subsequently applied to several case studies that illustrate the barriers to digital services trade. These case studies demonstrate the impact of the applicability of GATS to digital services on countries' international obligations. Finally, the book maps the electronic commerce-related provisions in in regional trade agreements (RTAs). Six extensive e-commerce RTAs are compared in depth and it is considered whether they add substantially to the existing multilateral obligations applicable to digital services trade.