Carbon Credit Watch

How carbon trading tax fraud works

Reuters
April 28, 2010

German prosecutors said on Wednesday they had searched more than 230 sites in a probe based on suspicions of tax evasion in the trading of EU carbon emissions permits.

It follows investigations in Britain, France, Spain, Norway and the Netherlands into carbon credit fraud over the last year.

HOW DO FRAUDSTERS DO IT?

The fraud has high returns over a short period of time. It is difficult to prove, meaning convictions are sparse.

A simple version is ‘acquisition’ fraud where the goods are imported VAT-free into one European Union member state from another. Once the goods have been sold on the importer goes missing, taking the VAT, which is collected as part of the sale.

A more complicated form is called “carousel fraud”. Goods are imported VAT-free but are not sold for consumption in the home market. The goods are sold through a series of companies, each liable to VAT, before being exported, possibly even back to the original seller.

The first link in the chain often goes missing without accounting for the VAT. The final link reclaims the VAT it has paid from the government before disappearing.

TIMELINE:

APRIL 28 – German prosecutors search sites across the nation in a carousel fraud investigation. [ID:nLDE63R17A]

MARCH 30, 2010

Spanish police say they have arrested nine people on charges of avoiding 50 million euros ( $67.54 million) in tax linked to trading in carbon credits. [ID:nLDE62T1GX]

Norwegian tax authorities said they will investigate all firms’ EU carbon permit transactions in the Nordic country as part of an ongoing probe into VAT fraud. [ID:nLDE62T13D]

MARCH 29, 2010

Oslo police say a police investigation into carbon tax fraud is widening its scope into money laundering, with five men charged. [ID:nLDE62S1IK]

MARCH 1, 2010

Norwegian police say at least three more firms are under investigation over alleged carbon tax fraud. [ID:nOSN004294]

FEB 26, 2010

Norway’s tax authority says three people are charged and at least two companies are under investigation in Oslo over alleged carbon tax fraud. [ID:nLDE61P22E]

JAN 11, 2010

Belgian prosecutors say three Britons and a Dutch man are charged by Belgian authorities with money laundering in an investigation into fraudulent trading in carbon emissions permits. [ID:nL26270168]

DEC 10, 2009

Fraudulent trading in European Union carbon emissions credits in the past 18 months has led to more than 5 billion euros in tax revenue losses for several EU nations, European police agency Europol says in a statement. [ID:nGEE5B908C]

SEPT 1, 2009

A patchwork of unilateral actions by few European Union nations to prevent suspected tax fraud in carbon permit trading could serve only to push the activity into neighbouring states. [ID:nLR650665]

AUGUST 19, 2009

The British tax office arrests seven people in London in a suspected 38 million pound ($57.13 million) VAT fraud in the EU carbon allowances market. [ID:nLJ527442]

JULY 15, 2009

The Dutch ministry of finance says there are “clear indications” of fraudulent activity in the Dutch carbon emissions market and put the onus of paying VAT on the carbon permit buyer, instead of the seller. [ID:nLF372145]

JULY 11, 2009

The Paris prosecutor’s office says a probe is under way into a suspected multi-million euro VAT fraud in the French carbon emissions market, although no one is placed under investigation at this point.  (Compiled by Vera Eckert, Amanda Cooper and Michael Szabo) ($1=.7508 Euro)

Read the original story here.  [PDFver here]

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