ECJ gets tough on carousel fraud
European Court of Justice says that participants in carousel fraud VAT scams can be collectively liable for evaded tax, even if they did not profit from the scheme
Participants in carousel fraud VAT scams can be collectively liable for
evaded tax, even if they did not profit from the scheme, European Court of
Justice advocate general Miguel Poiares Maduro has advised.
In written advice likely to be adopted by the full ECJ, he said VAT payers
who ‘knew or ought to have known that VAT would go unpaid in the supply chain’
should pay up.
He also said that where a VAT payer ‘may be expected to know or reasonably be
required to inform themselves of’ whether they were participating in a crime, ‘a
person may be held jointly and severally liable for payment of (unpaid) VAT’.
UK-based carousel fraud involves an importer buying goods from another EU
member state, where no VAT is legitimately due. These goods are then sold in
Britain, which generates VAT, but the importer does not account for the tax. The
goods are then resold before being re-exported often to the original supplier.