Brussels supports VAT fraud

Yesterday the European Commission rejected Hungary’s request yet again to introduce reverse VAT in the sugar trade. This is the second time the EC has rejected such a request by Hungary.  There exists a legal EU framework  called  “Quick Reaction Mechanism” which would allow  member states to introduce emergency measures when they are faced with a serious case of sudden and massive VAT fraud.

Among others, the left-liberal newsportal Index.hu also drew attention to a massive VAT fraud in Hungary which has been going on with the participation of Slovak companies. Statistics show that at least ten billion Forints of VAT are cheated this way each year.

Slovakian sugar which is known to be affected in the massive fraud

Hungary’s government introduced the practice of obliging the buyer, that is not the seller, of goods to pay VAT for grain in 2012, a retail sector where one could also see massive tax evasion.  Data from the National Tax and Customs Authority shows that the change has sharply reduced this kind of tax fraud.

Most of the profit from the sugar VAT tax fraud is pocketed by multinational supermarket chains like Tesco or Lidl.  This sounds like a pretty good explanation to me for  Brussels’ decision.

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3 Comments

  1. Géza

     /  26/04/2014

    the EU is the spearhead of the intenational companies and banks. National interests of any nationstate is of non importance to the EU! The EU is there to dissolve the nationstates and that is why I still can’t figure out who Orbán (and Fidesz) really is. Who still is very clear about Hungary should not leave the EU.

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  2. Any idea how this fraud works?

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    • Sorry, I should have explained it. (The referred index.hu article explains it in details, using specific data, too.)
      The gist of the method is that the fraudsters build up a complex, ever-changing network of companies which “export” sugar to Slovakia (on paper only), they sell it, they re-sell it, then they “import” sugar, they sell it, they re-sell it, etc. The man-in-the-middle companies are fly-by-night Ltds, owned by homeless persons and these pile up VAT debt, they produce fake invoinces and then they disappear. A substantial part of the profit from these criminal activities ends up in the multinational retail chains like Aldi, Tesco, etc. which often sell sugar below or close to the production price.

      According to an industry insider, 90 percents of sugar sold in Hungary is affected in the fraud. Reverse VAT could put an end to this practice, so Brussels’ response is … well, more than ‘notable’.
      http://index.hu/gazdasag/2014/01/13/a_cukor_90_szazaleka_afacsalt/

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