European authorities bust VAT ‘carousel fraud’ scheme
Ensure VAT Compliance for your business and avoid facing fines
EU law enforcement have bust a multimillion Euro VAT evasion scam. The scam involved a syndicate that used a series of shell companies to fraudulently claim goods located in Spain had been delivered to companies located in other EU countries. Authorities say the scam cost Spain €26 million in lost VAT revenue.
The scheme is an example of ‘carousel fraud’. Operatives fraudulently claim that goods are moved across various EU states. A series of shell companies are used to facilitate the fake claims. One of the shell corporations ultimately claims back the VAT supposedly owed.
In reality, the trades took place in just one country (in this case, Spain) and were thus subject to European VAT.
Coordinated carousel fraud busting
The crime fighting operation was coordinated by multiple national law enforcement agencies and supported by Europol and Eurojust.
According to the OCCRP, carousel fraud schemes cost EU countries billions each year. The schemes involve complex accounting procedures that exploit EU VAT policy encouraging trade. The scheme is a variety of missing trader fraud.
At the same time, the tightened regulations have potentially negative cash flow consequences for subcontractors. As so often, the case illustrates the tension between combating fraud and facilitating business operations.
Digital anti-fraud measures
The move to digital VAT compliance is partly a response to VAT evasion. Systems such as Belgium’s TNA are designed to carefully analyze masses of data and identify suspicious patterns.