Impacts of the reverse VAT liability in the construction sector

Date of project : 2023 - Project ongoing

In 2011, Finland introduced the reverse VAT liability for the construction sector as a countermeasure to the grey economy that had become prevalent in the sector. As a result of the reverse liability procedure, the main contractor is also responsible for the VAT payments of its subcontractors. The scheme aims discourage situations where a buyer deducts a VAT that the seller does not intend to pay to the state. This type of sector-specific reverse VAT liability has been implemented in several EU states (e.g. Sweden, Germany). However, little empirical research has been conducted on the effectiveness of this policy.

Construction site

The project examines how the reverse VAT liability has affected VAT-related payments and reporting in the construction sector. The research utilises tax data from VAT returns and the Difference-in-Differences method. The introduction of the policy serves as a variation of the research method. Companies that are not subject to the reverse VAT liability will serve as the comparison group.

Responsible researcher: Aliisa Koivisto, [email protected], +358 295 519 430

Aliisa KoivistoAnnika Nivala Aliisa KoivistoBusiness taxation and regulationTaxation