The European Public Prosecutor’s Office (EPPO) in Milan (Italy) have seized assets and arrested six people, believed to be part of a criminal organisation, in a sting against a massive VAT fraud scheme involving several countries, with estimated losses of €40 million.
At stake is a suspected VAT carousel fraud, a complex criminal scheme that takes advantage of EU rules on cross-border transactions between its Member States, as these are exempt from value-added tax (VAT).
The complex investigation uncovered a labyrinthine network through which companies established in Bulgaria, the Netherlands, Poland and Slovakia sold electronics and computer equipment to shell companies in Italy, administered by figureheads, in order to evade the payment of VAT.
According to the evidence, the goods were sold, under-priced, to companies in Italy, making it more difficult to identify the scheme and its perpetrators, while also increasing the illicit profits.
Ultimately, the commodities were sold to regular Italian companies at very competitive prices, as well as to other companies in the EU, allowing for massive tax savings. The scheme also generated huge VAT credits in Italy, all leading to immense criminal profits that were then money laundered, according to the investigation.
The evidence collected during the preliminary investigation, which included wiretapping, led to six arrests and to 60 searches carried out in several EU Member States, in October 2022.
Later, on 30 January this year, the European Delegated Prosecutors in Milan issued a precautionary warrant which allowed the police to seize property, luxury cars, jewellery and cash, and also to freeze bank accounts, for a total amount of €40 million. The preventive seizure order was approved by the judge of preliminary investigation of Milan on 11 February.
These coercive measures, issued by the EPPO office in Milan, were executed by the Italian Financial Police (Guardia di Finanza) of Milan, Varese, Bergamo, Como and Sesto San Giovanni, who also conducted the investigation, under the coordination of the EPPO.
VAT carousel fraud, or Missing Trader Intra-Community (MTIC) fraud, is the most profitable crime in the EU, costing around €50 billion annually in tax losses to the Member States, according to the latest estimate by Europol.