Economic crime report 2004 - Ekobrottsmyndigheten

2.4 CRIME LINKED TO CROSSBORDER TRADE
2.4.1 VAT Fraud
The adoption of the destination principle, the regulations of which
exempt goods from VAT in the seller’s country of domicile and make
them taxable in the purchaser’s country, has facilitated VAT fraud linked
to transactions within the EU. This exemption in the country of origin
provides simple channels for manipulating the system in order to avoid
taxation and/or obtain VAT refunds.
One method for taking advantage of the regulations is to use a company’s
VAT number during a short period of time and then relinquish it. Meanwhile,
goods have been purchased in another Member State and resold to
an independent domestic buyer. After that, the company (missing trader)
“goes missing” and no tax is paid. Maintaining that he acted in good
faith, the independent domestic buyer demands a refund on the input
VAT. Proof that the scheme was concocted in advance is difficult to establish.
In more complicated cases, several companies are involved in order
to foil detection and counterevidence. Sometimes the entire transaction
chain entails repeated “resale” of the same consignment, giving rise to the
term “carousel fraud.”
There is a danger that a deduction will be allowed for input VAT without
corresponding output VAT having been paid.
After treating carousel fraud as a high-risk area in recent years, government
agencies believe that its incidence has decreased. But given the
large amounts of money that may be involved, the danger of tax evasion
remains great.
A Closer Look at VAT and Selective Purchase Tax Fraud in the Food
Industry
In January 2003, the Swedish Economic Crimes Council launched a
nationwide, interagency monitoring project in the food industry. A
number of fraudulent methods have been documented so far.
The project will continue throughout 2005. VAT and selective purchase
tax fraud is widespread and involves large amounts of money.
2.4.2 Smuggling of Commercial Imports
A study was carried out to estimate the volume of uncollected customs
revenue in all of 1999 by means of a number of monitoring actions repre-
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