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Italian Police Breaks Up Europe-Wide VAT Fraud Ring

by Ulrika Lomas, Tax-News.com, Bussels

14 October 2016


On October 12, the Italian financial police said it had broke up a value-added tax fraud ring allegedly involved in transactions totaling EUR930m, through 180 companies in 15 European Union (EU) countries.

The Italian Financial Guard said the group was responsible for stealing EUR130m in VAT, which should been remitted to the tax authorities.

The arrangements targeted by the Italian police, in a joint operation with authorities from five other EU countries, included various forms of "carousel" fraud, whereby EU VAT rules were manipulated to ensure that tax was never paid or remitted in a fictitious cross border supply chain and the intermediaries disappeared.

Carousel fraud, formally known as Missing Trade Intra-Community fraud, typically involves the sale of goods across the European Union's internal borders without VAT and their onward sale to the domestic market inclusive of VAT, normally at a discount. MTIC occurs when VAT is collected on the sale of imported goods to the domestic market inclusive of VAT, and the tax collected is never remitted to tax authorities and the seller disappears.

145 Italian companies (of which only 54 were real operations) are said to have been involved in the ring, together with 35 "conduit" companies in Austria, Malta, the Czech Republic, Slovakia, Poland, Belgium, Croatia, Germany, Romania, Cyprus, the United Kingdom, Ireland, Lithuania, and the Netherlands.

The transactions mainly involved high-tech products, such as tablets, digital media, and television. However, the ring also was said to have traded in toners for printers and food commodities, such as flour, sugar, and milk powder.

TAGS: compliance | tax | business | value added tax (VAT) | tax compliance | Belgium | Ireland | Malta | VAT cross-border transactions | law | Romania | Slovakia | United Kingdom | enforcement | Austria | Cyprus | Czech Republic | Germany | Italy | Poland | European Union (EU) | Croatia | Lithuania | VAT compliance matters | Europe

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