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08 Mar 2017

EU fines the UK for customs fraud

An enormous €2 bn fine is expected to be the consequence of Britain’s negligence to stop the actions of a massive fraud network that allowed Chinese goods to flow into the markets of the European Union. The European Anti-Fraud Office (OLAF), which is a part of the European Commission (EC), made this proposal to the EC Directorate-General for Budget in an attempt to regain some of the lost funds.

OLAF made a thorough investigation for the last 2 years in the United Kingdom and other EU countries, after snippets of information about a fraud network reached the office. More specific, it focused on the ports of Felixstowe and Dover, which are considered to be entry points into EU for a lot of Chinese items. The goods that the fraud network preferred were textiles and footwear. British customs, according to research, repeatedly ignored warnings to take action against the network and, in many cases, the network declared very generous prices. In one case, OLAF found out that trousers were declared with a value of 91 cents per kilo when the average price declared across the EU is €26 per kilo.

When products were cleared by British customs, the fraudsters were transferring them to other EU countries and selling them through companies that had been set up exactly for this purpose. When the goods were sold, the company would be shut down only to reopen at a later time. Using these tricks, importers were avoiding to pay VAT making their cheaper products more attractive to the consumers.

The French Customs Investigations service have reported that there is a problem of cooperation with the British Customs authorities every time they request information on matters like that. They believe that their British counterparts do not want to tackle this kind of frauds because it doesn’t directly affect their country. They also note that in some cases, values of products at the entry ports are discounted by 5 or even 10 times.

EU officials said that most of the times, Britain seems to cooperate only when there is an ongoing investigation. They accuse the British Treasury (HRMC) that it is always coming up with an excuse for not implementing strict measures that all the other EU countries do. In response, the HRMC stated that “we consider OLAF’s findings and recommendations. The Treasury has an excellent record in tackling fraud securing more than £26.6 billion last year alone”.

OLAF officials said to journalists, that there are still losses from these kinds of frauds since they didn’t seize to exist. They express the opinion, that the UK hub will continue to grow unless there is a decisive action. People with knowledge of the market say that the UK is offering easy customs clearance for Chinese goods, so it can prevail in the competition with the ports of Rotterdam in The Netherlands and Antwerp in Belgium.

The estimated cost of lost revenue for the EU budget is approximately €2 bn euros. There is also an important loss of VAT for the major EU countries like Germany, France, Spain and Italy, which amounts to €3.5 billion.