Terrorists may be financed by VAT carousel fraud
1 August 2005, BERLIN - German federal auditors have warned that Islamist terrorist groups are financing themselves with a scam unique to the European Union known as VAT carousel fraud, according to the newspaper Sueddeutsche Zeitung on Sunday.
1 August 2005
BERLIN - German federal auditors have warned that Islamist terrorist groups are financing themselves with a scam unique to the European Union known as VAT carousel fraud, according to the newspaper Sueddeutsche Zeitung on Sunday.
The secret warning said that the German state was practically powerless to stop the swindlers, and needed to set up a national tax squad to pursue them. Germany's taxes are collected locally by the 16 states.
A carousel exploits the fact that goods can be traded between European Union countries without charging value-added tax (VAT). The importer can charge VAT when reselling the goods and simply disappear, never passing the tax to the authorities.
To cover tracks and lever the profits higher, the goods are sold through a whole series of paper companies, each of which claims a tax refund from authorities. They are then re-exported for the cycle to start all over again, which is why the system is termed a carousel.
In a story to appear in its Monday edition, Sueddeutsche said that the German federal audit office believed there was evidence pointing to terrorists financing themselves with this form of organized crime.
Organized VAT fraud was defrauding Germany of EUR 20 billion annually.
The confidential warning said that prevention needed to be stepped up and a federal investigation unit created, analogous to the federal prosecutor general who fights terrorism and crimes against the state.
Subject: German news