VAT "CAROUSEL" FRAUD: INTERNATIONAL IN SCOPE (3/3)
VAT "carousel" fraud originates in Europe (3/3)
Carousel fraud is on the rise.
Between the fraud of 2022, the biggest in Europe, unveiled by EPPO, and Netflix, which has produced a documentary on "carbon quota" fraud, VAT is the order of the day.
Although the perpetrators of this fraud are portrayed as cheerful, mischievous characters from a Netflix series, it is indeed a fraud that has been organized, and the mechanism is reprehensible.
What are greenhouse gas emission allowances?
In 2003, the European Union adopted a directive setting up a system for the allocation and trading of greenhouse gas emission allowances in order to comply with the Kyoto Protocol.
This system authorizes each EU country to emit a given tonnage of CO2 over a given period, and allocates them to polluting activities. If, at the end of the period, the country has emitted less CO2 than it is entitled to, it can then sell them on.
These allowances are considered to be intangible personal property, and anyone registered on the national register can hold and trade allowances.
From a tax point of view, their transfer had the character of a supply of services, and was automatically subject to VAT at the rate of 19.6%, thus falling under the provisions of the l'article 259 B of the French General Tax CodeThey were sold by a service provider outside France to a customer established in France and subject to VAT.
Fraud organization
The fraudsters have quite simply set up a "caroussel" fraud.
Company A makes a VAT-exempt intra-Community supply of quotas to company B, which is subject to VAT in France.
Company B resells them to company C, this time charging VAT but not passing it on to the tax authorities.
Company C, in turn, resells the carbon quotas to company D, after which the companies evaporate and start up again under different names.
With each carousel round, the tax authorities reimburse VAT that has not been passed on to them.
Sums embezzled are sent to countries where banking secrecy makes taxation opaque.
Tracfin was alerted in November 2008, but it was not until February 2009 that the courts began to investigate the case.
The amount of the fraud is exorbitant, amounting to €283 million in uncollected VAT, and the main protagonists have been sentenced to 8 years in prison.
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