CARBON crooks

Not only are the carousel VAT fraudsters targeting carbon emission credits - so are computer hackers. Emission credits have been stolen and sold to companies who thought it was a legitimate transaction. Read the story here. The latest attack on the emissions-trading market comes after it emerged that up to 90 per cent of the trading could actually be fraudulent. See the Green Fraud post from 5 January.

REAL cost of Vat fraud

I got an email from a reader who suggests that the real cost of VAT fraud is not being recovered by the authorities or made widely known to the tax-paying public. In relation to Craig Johnson, who has been ordered to pay back st£26 million, it is suggested he actually personally benefited to the tune of st£167 million from Carousel VAT fraud. That mirrors the experience with Ireland's most notorious VAT fraudster Dylan Creavan. He paid back st£18.5 million in a deal hammered out with the UK's Assets Recovery Agency and Ireland's Criminal Assets Bureau. Creavan was originally charged with fraud totalling st£240 million after his company carried out transactions worth (on paper) €1.6 billion. Obviously investigators have to draw a line under their operations at some point leaving the fraudsters with hidden caches of money. While Creavan spent a year on remand before being acquitted of fraud, Johnson is serving 12.5 years behind bars.

MISSING trader fraud

Missing trader fraud (MTIC), also known as Carousel VAT fraud is still costing the European Union an estimated €80 billion a year. With companies going to the wall, there are no doubt a few unscrupulous directors toying with the idea of one final pay-off. Here's how it works; goods are sold from an EU supplier to another company in an EU state (the buffer company) and then through a chain of companies in that EU state (broker companies). Eventually they are sold to the final trader who re-exports the goods (the exporting broker). The original consignment is zero-rated for VAT. The importing buffer company runs up a large VAT debt and then disappears, becoming a missing trader. At the other end of the chain the exporting broker does not owe VAT but instead reclaims the tax on its purchases from the broker companies - which in some cases adds up to millions every month. The missing traders are not usually the organisers of the fraud , usually small-time criminals paid for their assistance. The organisers needs to generate large volumes of transaction and so use small items of high value such as central processing units, mobile phones, gold bullion. Re-circulating the consignment through the chain of companies boosts profits hence the name 'Carousel VAT fraud.' The transactions through the chain of brokers have no commercial reality, their only purpose to is to defraud the tax system by claiming back the VAT that would have been paid in legitimate trade.
Irish carousel fraudster Dylan Creaven's company was (on paper) exporting to UK brokers more micro-chips than Intel. Silicon Technologies,based in a small factory unit, 'supplied' st£1.5 billion worth of CPUs from 2001 until police raided his premises in 2002.