EC tries to get on top of carousel fraud

Wants more timely reports from missing traders

By John Oates • Get more from this author

Posted in IT Channel, 17th March 2008 14:54 GMT

The European Commission is proposing speeding up how VAT regulations work in order to reduce carousel fraud.

Carousel fraud, or missing trader fraud, involves importing high value but VAT-free goods from another Community country. The goods are then sold on with VAT added, before the company disappears without paying HMRC the tax they owe. In carousel frauds the goods move, or appear to move, several times with VAT extracted at every stage. High tech goods, such as chips or phones, are often at the centre of these scams, as they are small and comparatively expensive.

The Commission is gunning for a one-month window to declare any transaction liable to VAT between member states. It also proposes cutting the time from three months to one month for that information to be passed onto other Member states.

Companies which make transactions worth more than €200,000 per year will have to file monthly VAT declarations. The procedure for filing VAT returns will also be simplified.

The Commission claims that "these measures will not impose an additional administrative burden on economic operators".

Carousel fraud is an expensive problem within Europe - the UK Treasury estimates it lost £3bn in revenue in 2006. The UK moved to a reverse charge system last summer.

The reverse charge means customers must pay VAT to Her Majesty's Revenue and Customs, not to the supplier of goods or services. The change only applies to buyers of computer chips and mobile phones - the goods most often targeted for this type of scam.

More detail from the EC here. ®

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