Carousel fraud is a massive problem across Europe, costing over
£34 billion in the EU and billions of pounds a year in the UK
alone. Though the UK has taken measures in recent months to battle
carousel fraud, the EU and other EU countries have been slower to
take action.
Carousel fraud is a variant of Missing Trader Intra-Community
(MTIC) VAT fraud. In its simplest form, MTIC fraud involves
obtaining a VAT registration number in, say, the UK, for the
purposes of purchasing goods free from VAT in another, selling them
at a VAT-inclusive purchase price in the UK and then going missing
or defaulting without paying the VAT due to Her Majesty's Revenue
and Customs (HMRC). Carousel fraud involves the same goods being
traded around contrived supply chains within and beyond the EU,
re-entering the UK on a number of occasions with the VAT being
stolen each time.
The European Commission has now approved plans to speed up the
exchange of information on transactions between countries.
Transaction notification can take up to six months at present, and
the Commission wants to slash that to between one and two months
across Europe to help catch up with fraudsters.
"The measures being proposed today are the first step towards a
more effective fight against VAT fraud," said László Kovács, the
European Commissioner responsible for taxation and the customs
union. "Their advantages are that they can be implemented very
quickly and do not impose any significant administrative burdens on
economic operators.”
The plan involves the creation of a new EU Directive and
Regulation setting up a new system which will transmit VAT
transaction information more quickly between member states.
"Buyers or customers making transactions to a value of more than
€200,000 per calendar year will be obliged to submit their VAT
declarations monthly," said a Commission statement. "The threshold
has been set at this level to avoid imposing extra obligations on
undertakings which make intra-Community acquisitions only
occasionally or only for small amounts."
Carousel fraud is a major drain on the economies of EU
countries. The Commission has said in the past that more is lost
per year in Europe on carousel fraud than it spends on the Common
Agricultural Policy (CAP). The CAP budget is £34 billion.
The House of Lords has said that in 2005/2006 the fraud cost the
UK £4.5 billion. The UK has since introduced laws specifically
targeted electronic goods such as MP3 players, mobile phones and
computer chips.
These goods were seen as valuable instruments for the fraud
because of the high monetary value and small physical size. Traders
must pay VAT direct to HMRC for these goods rather than to the
supplier in a system called the reverse charge.
The Commission's new proposals must be unanimously approved by
EU nations before it can be put into effect.
