EU: A EUR 93 Million VAT Carousel Fraud Investigation

Investigation Goliath, conducted by the European Public Prosecutor’s Office (EPPO) in Hamburg, led to accusations brought up by the Regional Court of Dusseldorf against three suspects. These three are believed to be leaders of the international criminal group involved in EUR 93 million VAT fraud. 

Two suspects were arrested in November last year, and one suspect, a Danish citizen who fled to Africa, was arrested and deported to Germany from Nairobi, Kenya, in June this year.

Facts of the Case

Following the investigation, it was revealed that the three suspects had orchestrated an international criminal group. This group was involved in the so-called VAT carousel fraud related to the consumer electronics trade, primarily AirPods.

To understand the situation surrounding this case, it is crucial to comprehend carousel fraud. Carousel fraud is a complex scheme, also known as Missing Trader Intra-Community (MTIC) fraud, that exploits the fact that VAT is not immediately applied to EU B2B cross-border transactions.

When VAT-registered businesses buy goods from another company in one of the EU Member States, VAT is not immediately paid to the supplier. Fraudsters use this gap to resell purchased goods on the domestic market, including VAT, at a lower price than competitors. Once they sell all the goods, fraudsters usually disappear without paying the due VAT to national Tax Authorities.

In this case, the suspects established several companies across EU Member States and some non-EU countries, intending to trade AirPods between those companies before finally selling them to final consumers. Therefore, they created a chain of missing traders who would disappear without respecting their tax obligations. 

Additionally, some companies in this chain would claim VAT reimbursements from the national Tax Authorities, further harming these countries' public revenues.

Conclusion

This investigation, conducted with the cooperation of Europol, the German Tax Authorities, and several national police forces, shows how elaborate and complex international VAT frauds can be and how fraudsters can abuse the rules that help international and cross-border trade to gain personal benefits.

Source: EPPO - Investigation Goliath