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How VAT fraudsters steal millions of euros


Dozens of scams that used specific “tricks” either to avoid VAT or to reap tax refunds from the State were identified by AADE. In order to stop their action, the control mechanism “froze” the VAT numbers of the individuals involved, both natural persons and businesses. However, this year saw a record of VAT fraud, as more VAT numbers had to be deactivated than any other year.

Vangelis Durakis writes 

The cases caught in the “lens” of the auditors mainly concern cases of “disappeared traders”  through  “carousel” type frauds,  i.e. circuits that carry out  virtual transactions  (imports and exports) with companies from third countries, with the aim of avoiding payment of VAT but also claiming  a refund that has not been paid!

How fraudsters set up VAT fraud

Carousel fraud involves several companies selling to each other domestically goods or services which are imported VAT-free from a supplier (the so-called vehicle company) in another EU country.

One of the companies in the chain, usually the one importing the goods, does not pay the VAT to the state budget even though it charges it to the next buyer, thus committing fraud.

This company in most cases disappears without a trace immediately after the transaction ( the so-called “disappeared merchant”) .

The collection of the tax is therefore impossible in the country where the goods or services are consumed.

However, the other buyers in the chain request that the VAT be refunded to them from the state budget after the goods are resold.

Thus, the state can refund VAT for VAT that was not collected with the damage being double, as the State loses not only 24% of the value of the traded goods, but returns 24% of their value!

Another parameter is that the goods or services were not actually moved or did not even exist, i.e. non-existent transactions.

How the carousel system works

But how does the infamous “carousel” system work? For example, company A imports goods from China to Greece, destined for company B based in Bulgaria. Because it is a re-export, it does not charge VAT in Greece, but the VAT will be remitted to Bulgaria by company B.

Company B in Bulgaria pays the transaction price to Company A. However, the goods never reach Bulgaria, but remain in Greece and are available on the domestic market, without 24% VAT.

In these cases, both Company A and Company B are owned by the same businessman or ring and the payment for the supply of the goods is real and evidenced by bank statements, but is fictitious as the money remains in the ring’s control and it is done simply to disorient the tax authorities.

 Record fraud in 2022 in the field of VAT

 The AADE data , however, for 2022 show that  176 audits were carried out in major tax evasion and fraud cases and violations were found in 147 cases or 83.5% of audited cases.

In all 147 cases, the TINs of those involved  were deactivated and this is the largest number of TINs that have been frozen in recent years. In  2021,  the Tax Office had “frozen” 139 TINs, in 2020 it deactivated 144 TINs, and in 2019, the violations that led to the deactivation of TINs were 116. 

Greece is in fourth place among the EU countries with the highest rate of VAT fraud, as based on the latest data from the Commission, the cost of VAT evasion in our country amounted to  3.2 billion euros, or 19.7 % of potential VAT revenue.

The high rate of delinquency is due to the fact that the tax authorities are directed to the specific cases following complaints , which are overwhelmingly accurate.

In particular, investigation cases relating to intra-Community VAT fraud and the tracing of missing traders are targeted, using evidence from a specially designed  risk analysis and combined intelligence programme.

At the same time, data from the Transaction Network Analysis (TNA) system is used for the first time, whose main purpose is the processing and analysis of targeted information on cross-border fraud between EU member states.

Source: enikonomia

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