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1st Dec 2022

Fraud against EU dropped 20% last year

  • Customs-fraud hit member states differently during the Covid-19 pandemic (Photo: dawvon)
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The number of fraud and irregularities related to EU revenues and expenditure dropped 20 percent last year, compared to 2019, according to a report on Monday (20 September) from the European Commission.

Last year, EU national authorities reported a total of 1,056 fraudulent irregularities - with a combined financial impact of €371m.

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Although these figures confirm the steady decrease seen during the last five years, the EU Commission is calling on members states to adopt national anti-fraud strategies and establish effective control systems to reduce new risks related to the EU budget and recovery funds management.

The report adds that Hungary, Poland, Sweden, Denmark, and Ireland should reconsider joining the European Public Prosecutor's Office (EPPO) - a body responsible for uncovering and prosecuting fraud involving EU funds.

Currently, Cyprus, Denmark, Finland, Germany, Ireland, Netherlands, Slovenia and Spain do not have internal anti-fraud plans.

"The EU's unprecedented response to the pandemic makes more than €2 trillion available to help member states recover from the impact of the coronavirus. Working together at the EU and member state levels to keep this money safe from fraud has never been more important," said EU commissioner for budget Johannes Hahn.

In 2020, most fraudulent or non-fraudulent cases affecting EU revenues were linked to the undervaluation, incorrect classification or smuggling of goods - especially footwear, textiles, vehicles, electrical machinery and equipment.

However, customs fraud affected member states differently during the Covid-19 pandemic, the report found.

While detection rates in Belgium, Bulgaria, Germany, Croatia, Hungary, Poland, Slovenia and Sweden were highest in 2020 compared to the previous five years, those in Italy, the Netherlands, Austria, Portugal and Slovakia were the lowest.

In the report, the EU executive also warns that EU countries continue to lose billions because of tax fraud and inadequate tax collection systems.

VAT gap

The so-called 'VAT gap' - the difference between expected VAT revenues and collected - was estimated in 2019 at just below €130bn for the whole EU.

As the pandemic led to an increase in e-commerce, the EU Commission proposed in 2020 a legislative package to step up the fight against VAT and customs fraud online - obliging providers offering payment services in the EU to monitor and report about cross-border payments.

Meanwhile, the report shows that the number of both fraudulent and non-fraudulent irregularities related to EU expenditure in the period 2014-2020 increased, compared to those linked to 2007-2013.

In agricultural spending, some 62 percent of the irregularities were related to rural development programmes, which aim to boost the competitiveness and sustainability of the sector, while 25 percent were related to investments measures and promotion programmes.

Cases of conflict-of-interest linked to product promotion, such as wine, fruits and vegetables, are also being investigated by the EU's anti-fraud office OLAF.

Additionally, EU member states have also reported an increasing number of fraudulent irregularities related to basic infrastructure, from energy and transport to health and education.

Nevertheless, the fisheries policy is also seen as an area highly-affected by fraud and irregularities.

The falsification of documents, the creation of artificial conditions by beneficiaries and the incomplete implementation of the project are the most frequently detected irregularities within the agricultural spending.

Similarly, incorrect, missing, falsified supporting documents (45 percent), infringement of contract provisions (18 percent), eligibility and infringement of public procurement rules (15 percent) are the most identified issues within the EU's programme spending.

The EU executive has urged member states to strengthen data-collection, especially concerning cross-border cases.

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