Over #600m has been lost by Customs & Excise’s failure to prevent a massive alcohol duty scam.
Drink supposedly destined for export was allowed to be diverted into the UK market losing the Treasury some #620m in unpaid duty over a four-year period.
Customs knew about this so-called ‘outward excise diversion’ fraud as long ago as 1994 but failed to take action until 1998, according to a report from the National Audit Office. The report said over #300m could have been saved if Customs had decided to intercept the consignments.
However, in a serious breakdown of control, Customs allowed the drink to end up in the UK market while trying to gather evidence to prosecute. The report also revealed a further #216m was lost on duty that would have been paid to overseas authorities if the drink had been exported legitimately.
NAO chief Sir John Bourn said: ‘I am concerned about these substantial losses and will be making a report to parliament on the causes of the diversion fraud, the lessons to be learned and the action planned by Customs.’
In a statement, Customs said: ‘This should not have happened. It has been put right and will not happen again. It is our job to tackle large-scale fraud. We know about this money because our investigators uncovered it. The essential issue is the correct balance between securing the conviction of fraudsters and maximising the revenue.’
A spokesperson added that in light of the report, Customs would be considering whether disciplinary action would be taken against those involved in the management of the investigation.
When the losses first came to light last year, paymaster general Dawn Primarolo ordered an independent investigation, headed by ex-Deloitte senior partner John Roques.
Customs’ website is at www.hmce.gov.uk.
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