Vol. 571 No. 1
138 Mr. R. Bruton asked the Minister for Finance if he has carried out a detailed assessment of the alleged VAT fraud on Irish-British trade reported to have affected over ?8,000 million worth of trade; and if the opportunities for this have been thoroughly eradicated. [21055/03]
I am advised by the Revenue Commissioners that the matter to which the Deputy is referring is known as VAT carousel fraud. This involves the consignment of high value, low volume goods, typically computer processing units or mobile phones, through a chain of companies in two or more member states of the EU for the sole purpose of defrauding the Revenue authorities of the VAT payable on the goods in the country of eventual destination. The Revenue Commissioners are well aware of this type of fraudulent activity and have been actively tackling it in collaboration with the revenue authorities of the other member states concerned. A dedicated VAT carousel fraud unit in Revenue has the specific remit of addressing the issues and assisting other revenue authorities under the mutual assistance directives and regulations. Since 2000, over 35 investigations have been carried out. The Criminal Assets Bureau has also been actively involved in some of these investigations.
As a result of effective information exchange and concerted enforcement activity by the various revenue authorities in the EU, it is believed that the bulk of this type of trade in CPUs between this country and the United Kingdom has all but ceased. Inquiries to date indicate there has been no significant loss of VAT to the Irish Exchequer as the fraudulent activity has been targeted at other jurisdictions. However, because some of the trade has passed through Ireland, Revenue has adopted a very proactive approach to combating the frauds elsewhere.
The Revenue Commissioners have assured me their VAT carousel unit will keep the situation under constant review.
I thank the Minister for his reply. Can he explain how it took so long to detect this type of fraud when there was an active unit in place? Having read the CSO report on the export figures, am I correct that with €8,000 million passing through the Irish economy in any one year, the potential VAT loss is nearly €2 billion? Can the Minister assure us that, apart from the CPUs which he described, there are no other sectors where a similar opportunity exists for VAT fraud? Was the fraud carried out on the Irish or British taxpayers?
The fraud indicated by the figures to which the Deputy refers has been committed against the United Kingdom taxation authorities. However, that is not to say that we have not suffered some VAT carousel fraud. VAT carousel fraud is a feature in the member states of the EU. When goods are exported from one EU member state to another, a zero VAT rate applies. The fraud occurs when goods are exported at a zero VAT rate and are re-imported almost immediately, all of which may be done several times and involve a number of companies. The goods are eventually exported to the second country where finally a company goes missing with the VAT and there is a fraud on the exchequer of the relevant country. This has a negative effect on CSO statistics in regard to GNP and GDP because goods are being exported and re-imported which distorts export figures.
The CSO has indicated that our imports and exports were down by €8,000 million as a result of this fraud. In other words, the undetected activity going through Ireland was in the order of €8 billion. If that is the case, how can the Minister give us assurances that this practice has all but ceased if such similar carousel fraud could be committed in so many areas?
Has the Minister carried out an audit of the systems in the Revenue Commissioners' office which failed up to 12 months ago, but which he now assures us are absolutely foolproof? Have independent people examined the way in which this issue has been handled in order to give us assurances that this cannot occur in other areas?
This is not just a problem for the Irish authorities. The chief sufferer in this case was the UK revenue authority. There is nothing to prevent the export of goods from one EU country to another and under the present EU law, this involves a zero VAT rate. There has been no loss to the Irish Exchequer from VAT carousel fraud. However, the opportunity exists for people to do this. It applies as much between Ireland and the UK as between the UK and France or France and Germany and the revenue authorities in all the member states actively pursue prevention of this activity. However, it is impossible to eliminate this activity completely because it is legitimate to export goods from one country to another.
We want an independent audit of our revenue procedures to give us some assurances.
The Revenue Commissioners have had a VAT carousel fraud unit in place for some time and I am sure the UK authorities have a similar unit, as do VAT authorities in other jurisdictions, and they are constantly on the look out for this because the loss to the relevant member states can be significant. However, one cannot eliminate the sale of goods from one country to another.
I am not asking—
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