Vat fraud costs EU €100bn

VAT fraud is costing taxpayers €100 billion a year according to OLAF, the EU’s independent fraud investigations body.

Known as carousel fraud, it is one of the biggest scams operating in Europe. It also distorts import and exports figures between Britain and Ireland, OLAF believes.

The Revenue Commissioners estimate fictional sales of computer parts and mobile phones between Ireland and Britain amounted to almost €5 billion last year, costing Britain around €800 million.

Irish authorities say they have been successful in cracking down on this kind of fraud, believing it has become a minimal occurrence following several high-profile court cases and the powers given to the Criminal Assets Bureau.

But OLAF believes it is growing throughout the EU, and has called for much greater cooperation between governments to crack down on carousal fraud.

This pressure is likely to grow with new evidence that criminal gangs are shifting their rackets from drugs to VAT as a less risky and highly lucrative money generator.

A spokesperson for OLAF said carousal fraud is having an impact right across Europe and is even affecting country’s national budgets.

The volume of this ghost trade between Ireland and Britain greatly exaggerated trade figures for exports between the two countries.

According to the economic estimates for Ireland recently released by the EU: “The 2003 merchandise trade developments are distorted by a very marked fall-off in trade recorded with the UK, which is believed to be related to the termination of UK-based VAT fraud schemes in the course of 2002.”