Tackling parallel trading to mitigate tax fraud

Abstract

Parallel Trading has been discussed in our country since our EU Membership in 2004. It is a fact that during the first years of our membership Parallel Trading has been a hot potato and it still is today a subject which is discussed in various sectors because some parallel traders abuse it and are distorting the market with unfair competition. The EU Competition law and the free movement of goods regulations legalise parallel trade because through this customers may benefit from better prices and better products. Malta had to adjust its Competition laws so that these could tally with those of all members in the European Union. A thorough literature review reading enabled me to get a better insight of the subject researched. It helped me to understand more the term Parallel Trading, its advantages and disadvantages, and what constitutes this reality. It also helped me to understand to what limit of protection a manufacturer can have in order to have an incentive to invest in research and development. The purpose of my study was to study whether illicit parallel trading was affecting the local market and also if this was resulting in tax fraud and evasion. During my interviews held with various stakeholders, it was clearly noted that illicit parallel trading was still on the agenda because, apart from harming honest traders with unfair competition, it was also resulting in loss of revenue to the country. At the end of my study I tried to identify ways and means of how illicit parallel trading could be mitigated and what steps the Government could take in order to do so. Government must take a holistic approach to tackle such tax fraud by investing in human resources and training in order to introduce new professional methods to mitigate tax fraud coming from illicit parallel trading.