EU VAT fraud terrorism warning
Europol has warned the European Parliament (“EP”) that a share of the estimated €60billion EU VAT fraud is going to fund terrorism in the region.
Pedro Felício, head of Europol’s economic operations and property crime unit, raised warnings of the scale of the problem on 28 June. He was speaking at a joint meeting in Brussels of the EP’s Special Committee on Financial Crimes, Tax Evasion, and Tax Avoidance and the Special Committee on Terrorism.
Examples of terrorism-related VAT fraud cases include:
- Sweden and Denmark were hit by a £8.5 million tax scam last year, the proceeds of which is suspected of being used to fund terrorists such as al-Qaida.
- Germany broke up a terrorism-linked £54m VAT fraud scheme for terrorist organisations in 2015.
- Documents found in a cave in Pakistan that Osama bin Laden used as a hideout led investigators to a criminal network based in Italy that stole £0.9 billion through VAT fraud on CO2 certificates.
Last year, the UK was one of the 8 EU states which declined to join an EU initiative launching a joint task force, European Public Prosecutor’s Office (EPPO), to fight such VAT fraud.
EU agrees to fight VAT fraud
On June 22 the EU Council agreed on measures to strengthen administrative cooperation to better prevent VAT fraud. The proposed regulation will improve the exchange and analysis of information shared by member states’ tax administrations and with law enforcement bodies, and strengthen Eurofisc, a network of national tax officials for exchanging information on VAT fraud.
EU proposals for a ‘Single VAT Area’ for 2022 also aim to make the current EU VAT regime more ‘robust and simpler’ for companies, will see VAT charged on cross border-trade between businesses. Presently, such trade is VAT-exempt and enables ‘unscrupulous’ firms to collect VAT without remitting the money to the state.
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