Monday

26th Aug 2019

EU carbon credit system still 'at risk of VAT fraud'

  • Fraudulent traders used loopholes in the EU's emission trading system to make up to €5 billion (Photo: SWIFT)

A loophole allowing carbon-credit tax fraud resulting in losses of several billion euros has not been fully closed, the European Court of Auditors said in a report published Thursday (2 July).

The EU's Emissions Trading Scheme market, put in place to reduce carbon emissions, “remains at risk to VAT fraud”, the auditors said in a special report titled The integrity and implementation of the EU ETS.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

A carousel fraud involving the trade of emission credits in 2008 and 2009 amounted to a loss of €5 billion for national tax revenues.

A front company in one EU country would sell the carbon credits to a company in another, but without transferring VAT tax. The credits would then be traded and sold for a price that included VAT - but did not hand over that VAT to the relevant tax authority.

Following the fraud scheme, the EU adopted a directive which gave member states the possibility to implement a VAT reverse charge mechanism, which puts the obligation to pay VAT on the person to whom credits are transferred. This has been seen as a sufficient deterrent.

But not all 28 member states have put the mechanism in place.

Six countries - Bulgaria, Cyprus, Estonia, Latvia, Lithuania and Malta - are dragging their feet on implementation.

“The risk of value added tax (VAT) fraud on EU ETS allowances is consequently still not fully addressed in the European Union”, the auditors' report said.

Kevin Cardiff, the Irish member of the ECA, told this website that “we don't have an indication that [this type of fraud] is still being carried out”, but that may also stem from the fact that the ECA did not actively investigate it.

In a response published in the report, the Commission noted that in June 2011, the then climate and tax commissioners sent a letter to all member states that had not applied the mechanism yet to urge them to do so.

“This demonstrates that the issue has been addressed at the highest possible level”, the Commission said.

The Luxembourg-based European Court of Auditors – which is more of an audit agency than a real court – said in its report that while there were “significant improvements to the framework for protecting the integrity of the [ETS] system”, the management of the ETS by the Commission and national governments “was not adequate in all respects”.

EU emissions trading an 'open door' for crime, Europol says

The EU's flagship mechanism for combatting climate change, the Emissions Trading Scheme, is an "open door" for crime, a Europol agent told EUobserver, following revelations the scheme has cost governments €5 billion euros in tax fraud.

Opinion

EU must scrap carbon compensation scheme

One of the main planks of the EU Emissions Trading System rewards polluters and must be abolished, says Peter Eriksson of the Greens/EFA group.

Exclusive

Brexit row delays financial products transparency review

A European financial regulatory body set up after the financial crisis is at loggerheads with the European Commission over whether to carry out a transparency review of certain financial products. The reason: Brexit.

Commission defends Mercosur trade deal

EU commissioners defended a far-reaching free trade agreement between the EU and four Latin American countries, against critics who fear it will damage European farmers' livelihoods and the global environment.

EU hesitates to back France over US tariff threat

France has passed a new tax on tech companies that will affect US global giants like Facebook. Donald Trump has threatened retaliatory tariffs over it. The EU commission says it will "coordinate closely with French" on the next steps.

EU banks more vulnerable to shocks than feared

Eurozone banks, such as Deutsche Bank, might be much more vulnerable to a repeat of the 2008 financial crisis than EU "stress-tests" have said, according to a new audit.

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. Western leaders disagree on Russia, Iran, and Brazil
  2. Belgium: Parties clash on Reynders as EU commissioner
  3. Spain heading for yet another general election
  4. EU to discuss Brazil beef ban over Amazon fires
  5. 'Our house is burning,' Macron says on Amazon fires
  6. What happens when trafficking survivors get home
  7. EU states and Russia clash on truth of WW2 pact
  8. EU considers new rules on facial recognition

Join EUobserver

Support quality EU news

Join us