The Committee will consider various fraudulent schemes, including carousel fraud and missing trader fraud. VAT fraud is estimated to cost the Treasury between £2bn and £8bn a year, and scams are becoming increasingly complex to counter member states attempts to curb the practice. The fraud works by traders selling goods imported from EU countries (a transaction that does not require VAT payment) in the UK with VAT added and then failing to pass that VAT on to the Treasury. Goods are often then re-exported to Europe, which is again another zero VAT transaction. Often the actual items being traded never even enter the UK.
The Committee will look in detail at various issues surrounding VAT fraud, including the Government's moves to encourage the European Commission to introduce a 'reverse charge' on goods which are susceptible to this kind of fraud. This would involve the buyer paying VAT directly to the Government. Other areas it will investigate include:
- Are there gaps in EU and UK legislation that allow this kind of fraud?
- What impact does the fraud have on the internal market?
- Should there be increased cross border liaison between tax and law enforcement officials?
- Are member states able to fight this kind of crime unilaterally in the context of an increasingly globalised economy?
