Tax Fraud Distorts UK Trade Data

by Jason Gorringe, for LawAndTax-News.com, London

11 August 2005

Figures released on Tuesday by the Office for National Statistics revealed that the UK's deficit on trade in goods and services improved in June to stand at £2.5 billion.

However, the ONS went on to warn that the breakdown between EU and non-EU trade may have been distorted by changes in the pattern of Missing Trader Intra-Community (MTIC) Fraud, and explained that it is investigating the impact of this possibility on the trade in goods estimates.

Missing trader fraud, also known as 'carousel fraud', involves the importation of goods (such as mobile phones and computer components) free of value-added tax. The goods are then sold on by companies with VAT added, following which the firms disappear, having pocketed the difference.

The ONS had accounted for such practices within the EU, and had adjusted its figures accordingly. However, a sudden surge of exports of mobile phones and computer chips to non-EU countries has raised concerns that the trade figures for April, May and June may need to be reassessed.

Speaking to reporters following the release of the figures for June, an ONS statistician explained that:

"We're not sure what precisely is going on yet. What appears to have happened now is there is a new variation which we are in the process of investigating."

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