EC ramps up fight against carousel fraud

The EC has moved to establish a Europe-wide approach to combating missing trader intra community fraud – otherwise known as carousel fraud.

Member states have adopted a proposal for an optional and temporary application of the reverse charge mechanism to supplies of certain goods and services. It is intended to allow countries to fight carousel fraud (the non-declaration of VAT charged to customers) in a consistent manner across the EU.

The proposal covers greenhouse gas emission allowances, which are increasingly the object of VAT scams, as well as computer chips, mobile phones, precious metals and perfumes. The document also includes evaluation and reporting obligations for member states, which are aimed at providing a precise assessment of the efficiency of the measures.

The European commissioner for taxation and customs, László Kovács, said: ‘Actions taken against [carousel] fraud should be taken in a consistent manner across the EU and clear evaluation criteria should be established’.

The EC proposal is not intended to change the fundamental principles of the VAT system and therefore remains limited in scope, both as regards the number of goods/services and the duration of the application period. The type of supplies to which the scheme could apply is based on recent experience with missing trader intra community fraud.

Last month, HMRC arrested seven people on suspicion of a £38 million carousel fraud involving emissions allowances, just weeks after the Government introduced legislation to remove VAT from supplies carbon credits traded within the UK.

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