Sunday

18th Nov 2018

Another ETS fraud raid reveals firearms, piles of cash

  • Piles of cash and a stash of firearms were found when the locations were raided (Photo: aloha orangeneko)

In the early hours of Friday morning, UK tax authorities raided a series of homes and businesses nabbing four men that are believed to be part of an organised criminal gang suspected of ETS carbon trade fraud worth £38 million (€44m).

Large piles of cash and a stash of weapons were uncovered when investigators entered seven properties in the London and Leicester areas.

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The arrests, of individuals between the ages of 29 and 53, are linked to raids that took place in August last year where nine people were arrested. The operation was part of "a complex, 15-month investigation," according to Her Majesty's Revenue and Customs.

However, the development is unrelated to the 25 arrests made earlier this month in the UK and Germany when authorities engaged in a blitz of raids on hundreds of sites in the two countries, including on Deutsche Bank and energy firm RWE, in a case involving the theft of an estimated €180 miillion from state revenues.

"The two investigations are completely separate," a spokeswoman for HMRC told EUobserver.

The criminal activity the raids focussed on relates to what is known as "carousel fraud." Criminals establish themselves in one EU member state and open a trading account with the national carbon credit registry. They then buy carbon credits in a different country, which makes them exempt from VAT. These are then sold to buyers in the original country, but with VAT slapped on, although the VAT then just disappears along with the trader and the money never arrives in government coffers.

Last December Europol, the European criminal intelligence agency, last December issued a warning that ETS fraud across the EU had resulted in around €5 billion in lost revenues.

In response to the concerns about the attraction of the ETS to fraudsters, the UK government has reduced to zero the rate applied to emissions credits, effectively making them VAT-free. Criminals cannot steal tax revenue that the government has decided it will no longer collect.

"Criminals are criminals and will look to taking advantage wherever it is easiest for them. Before it was mobiles and computer chips. Right now, they think the ETS is a good bet," said the spokeswoman.

"If there's a window or loophole, they will try to exploit it. EU member states need to take the action they need to take in this matter, but it is them to put forward what it is they need to do."

At the EU level, a new EU directive on reverse charges for emissions trading, which aims to close off this form of tax fraud, was implemented in February.

Under the directive, EU member states may for a temporary period optionally apply a reverse charge to switch the responsibility of paying the government the VAT collected from the vendor to the customer.

The directive has so far only been applied by Denmark, France, the Netherlands, Spain and the UK. Germany however has not. Though an EU directive, its application is optional because VAT is a domestic, not an EU responsibility.

If the experimental directive turns out not to put an end to ETS fraud, "other options may be considered," according to the commission.

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