The Isle of Man government has announced that it has removed Value-Added Tax from supplies of emissions allowances (also known as carbon credits) traded within the Isle of Man and the United Kingdom, in order to prevent the risk of VAT fraud.
According to a government statement 'the new law, which mirrors legislation introduced in the United Kingdom, follows evidence that commodity trading in emissions allowances is being used by fraudsters to steal VAT revenues from the United Kingdom, and that the United Kingdom and so the Isle of Man may become a major target for this activity in the coming months'.
'The change will have no effect on legitimate trading but will prevent fraudsters from charging and collecting VAT, which they have no intention of paying to the Treasury. The fraud is widely known as carousel fraud, and covers a wide range of small and valuable products, costing European treasuries billions every year.'
'The emergence of carbon trading markets has opened opportunities to fraudsters, which European Union members now want to swiftly nip in the bud. France has recently exempted carbon permits from VAT, while Netherlands have introduced a reverse charge mechanism.'
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