Missing Trader Intra Community Fraud (MTIC) VAT Fraud Practical aspects of cooperation between...
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Transcript of Missing Trader Intra Community Fraud (MTIC) VAT Fraud Practical aspects of cooperation between...
Missing Trader Intra Community Fraud(MTIC) VAT Fraud
Practical aspects of cooperation between Member States and EU Institutions
A UK Perspective – May 2008
Cedric AndrewMTIC National Coordinator
HM Revenue and Customs, United Kingdom
Understanding MTIC
The biggest VAT fraud that we face.
Orchestrated attack on the VAT system by organised criminals.
Requires contrived supply chains involving apparently legitimate businesses.
Takes advantage of EU VAT rules and trade facilitation.
Main commodities – were until 1st June 2007 mobile phones and computer chips – currently metals, alcohol, soft drinks
Major threat to public finances
2000-012001-02
2002-032003-04
2004-052005 - 06
GBP Billion
GBP Billion
2.50
2.50
2.30
1.701.90
3.00
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Financial Year End
£ B
illio
n
GBPBillion
GBPBillion
2.50
1.301.70
1.50
1.101.10
2.00
Impact on public finances - Previously published estimates of MTIC fraud
Range of civil interventions
– Registration – point of entry to VAT system – VAT repayment – extended verification: ‘Knowledge’ test Joint & several liability– Selective application of reverse charge derogation
Criminal investigation & prosecution – Exemplary prosecutions– Working with other UK and International law enforcement
agencies on joint investigations
Tackling MTIC – UK Domestic Strategy
Tackling MTIC – UK International Strategy
European Union
Improving speed & quality of information exchange (EU regulation 1798/2003)
Examining options for change to EU VAT system
International
Development of international Memorandum of Understanding Agreements and Mutual Legal Assistance Treaties
Operational
Joint working with international partners
Mutual Administrative Assistance to track goods, paperwork & businesses e.g. Multi Lateral Controls
Criminal work to trace money and identify orchestrators - Mutual Legal Assistance
The Knowledge Principle
Derived from the following ECJ judgements :
• Bond House, Optigen and Fulcrum (UK - Non Economic Argument )
• FTI (UK - Joint and Several Liability)
• Objective test confirmed by Axel Kittel (Belguim)
Keys Extracts from Kittel
Paragraph 56: ‘a taxable person who knew or should have known
that, by his purchase, he was taking part in a transaction connected
with fraudulent evasion of VAT must, be regarded as a participant in
that fraud
Paragraph 57: ‘That is because in such a situation the taxable
person aids the perpetrators of the fraud and becomes their
accomplice.’
Multi Lateral Controls – EU Regulation 1798/2003
• The individuals orchestrating the fraud
• The nature of their fraudulent behaviours
• The methodology and the characteristics of the fraud
• All of which can be applied to identify current and future fraudulent activity and to develop appropriate targeted administrative and criminal interventions
Although Multi Lateral Controls are historic events, they assist by identifying and understanding:
Transaction Chain
CountryTrader Name
Vat NoInvoice
DatePhone Model
Quantity
PriceProfit Per Unit
Net Value VAT Total
EU Supplier Estonia A xxx28-Apr-
06Nokia N91 2995 £502.65 £1,505,436.75 £1,505,436.75
Missing Trader UK B xxx28-Apr-
06Nokia N91 2995 £503.45 £0.80 £1,507,832.75 £263,870.73 £1,771,703.48
Buffer 1 UK C xxx28-Apr-
06Nokia N91 2995 £503.65 £0.20 £1,508,431.75 £263,975.56 £1,772,407.31
Buffer 2 UK D xxx28-Apr-
06Nokia N91 2995 £503.70 £0.05 £1,508,581.50 £264,001.76 £1,772,583.26
Buffer 3 UK E xxx28-Apr-
06Nokia N91 2995 £503.90 £0.20 £1,509,180.50 £264,106.59 £1,773,287.09
Buffer 4 UK F xxx28-Apr-
06Nokia N91 2995 £504.40 £0.50 £1,510,678.00 £264,368.65 £1,775,046.65
Buffer 5 UK G xxx28-Apr-
06Nokia N91 2995 £505.00 £0.60 £1,512,475.00 £264,683.13 £1,777,158.13
Broker UK H xxx28-Apr-
06Nokia N91 2995 £525.20 £20.20 £1,572,974.00 Nil £1,572,974.00
EU Customer France I xxx
An Example of an Extended Verification of MTIC Transaction Chain
No Commercial Rationale
• EU Customer can buy for less from EU Supplier
• Buffers – Fixed Price Per Unit
Men of Straw
• EU Supplier
• UK Buffers
• EU Customer
• EU Regulation 1798/2003
• Essential information received from Estonia and France
WHOLESALER
FRENCH SUPPLIER
MISSING TRADER
BUFFER TRADER
INVOICES
MISSING TRADERINVOICE
BUFFER INVOICE
CONSIGNMENT DELIVERED DIRECT TO WHOLESALER
?
RETAILER
WHOLESALE INVOICE
Simple Acquisition Fraud
WHOLESALER
FRENCH SUPPLIER
MISSING TRADER
BUFFER TRADER
INVOICES
MISSING TRADERINVOICE
BUFFER INVOICE
BELGUIM CONDUIT
DUTCH CONDUIT
BELGIUM CONDUIT DELIVERS CONSIGNMENT
DIRECT TO UKWHOLESALER
FRENCH SUPPLIER INVOICES BELGIUM
CONDUIT
BELGIUM CONDUIT INVOICES DUTCH
CONDUIT
DUTCH CONDUIT INVOICES UK
MISSING TRADERS
FRENCH SUPPLIER DELIVERS CONSIGNMENT
TO BELGIUM CONDUIT
?
RETAILER
WHOLESALE INVOICE
Complex Acquisition Fraud
UK Defaulter
Buffer 1
Broker
3rd Country Customer
EU Conduit 1
EU Conduit 2
EU Conduit 3
EU Supplier
Buffer 2
Buffer 4
Buffer 3
3rd Country Freight
Forwarders
UK Freight Forwarders
EU Freight Forwarders
By AirFerry
By Air
Off Shore Bank
Third Party Payment
£1,000,000
Tax Loss£149,111
Sells: £852,064 VAT £149,111 Total: £1,001,175Benefit: £1,175
Sells: £853,064 VAT £149,286 Total: £1,002,350Profit: £1000 Net VAT: £175
Sells: £855,064 VAT £149,636Total: £1,004,700Profit: £2000 Net VAT : £350
Sells: £857,064 VAT £149,986Total: £1,007,050Profit: £2000 Net VAT: £350
Sells: £859,064 VAT £150,336Total: £1,009,400Profit: £2000Net VAT: £350
Sells: £910,607 VAT: NilTotal: £910,607 Profit: £51,543Net VAT:- £150,336
Sells: £1,000,000 VAT: Nil Total: 1,000,000
Complex Carousel Fraud
Switzerland
United
Kingdom
France
Regulation 1798/2003
Logistics Office
Naples IIGerman Customs
Naples IISwiss
Customs
‘Nemesis’ Scanning
Conduit
Traders in
Other Member
States
Invoices
Invoices
Invoices to
Conduits
Germany
Multiply Invoices Multiply
InvoicesMultiply Invoices
Share
Nemesis data
with Other
Member
States
Regulation 1798/2003
Mutual Cooperation
Mobile phone 3rd country exports May 2005 – Nov 2006
May
-05
Jun
-05
Jul-
05
Au
g-0
5
Sep
-05
Oct
-05
No
v-05
Dec
-05
Jan
-06
Feb
-06
Mar
-06
Ap
r-06
May
-06
Jun
-06
Jul-
06
Au
g-0
6
Sep
-06
Oct
-06
No
v-06
USA
Singapore
Hong Kong
Switzerland
Dubai
0
50
100
150
200
250
300
350
400
£ Millions
USA
Singapore
Hong Kong
Switzerland
Dubai