Thursday, September 27, 2018

EU Demands Action on Missing Billions in Uncollected Customs Duties Within Two Months

Accusation of Wholesale Fraud Prompts Threat of Court Action
Shipping News Feature
EUROPE – UK – The report by the EU's anti-fraud body OLAF in 2017 which concluded that the UK owed €2.7 billion in uncollected Customs duties has returned to haunt the British authorities who have apparently done nothing to resolve the matter. Based on a proposal by the Commissioner for Budget and Human Resources, Günther H. Oettinger, today the European Commission has decided to send a Reasoned Opinion to the United Kingdom because of its failure to make customs duties available to the EU budget, as required by EU law.

This is the second step the Commission is taking in the formal infringement procedure for this case in order to protect the financial interests of the EU. In March 2018, the Commission opened the infringement procedure following up the aforementioned report. That had found that importers in the United Kingdom evaded a large amount of customs duties by using fictitious and false invoices and incorrect customs value declarations at importation, and in a statement at the time said:

“Despite having been informed of the risks of fraud relating to the importation of textiles and footwear originating in the People’s Republic of China since 2007, and despite having been asked to take appropriate risk control measures, the United Kingdom failed to take action to prevent the fraud.”

The EU authorities claim that further Commission inspections confirmed the very large scale of this undervaluation fraud scheme operating through British ports between 2011 and 2017. Despite having been informed of the risks of fraud relating to the imports of textiles and footwear originating from the People's Republic of China since 2007, and despite having been asked to take appropriate risk control measures, the United Kingdom failed to take effective action to prevent the fraud.

Having arrived at that €2.7 billion figure (plus interest and minus collection costs) the United Kingdom also stands accused of infringing EU Value Added Tax legislation, leading to additional potential losses to the EU budget. The net result is that the UK has two months to act; otherwise the Commission may refer the case to the Court of Justice of the EU on the grounds that all Member States are liable for the financial consequences of their infringements of EU law.

For its part the UK has previously argued that the amount concerned is an overestimate by OLAF, based as it is on the average cost of the goods in the EU compared to the low prices clothing particularly retails in the British market. The EU meanwhile says the prices quoted per kilogramme for finished items was sometimes 50% cheaper than the price of the fabric from which they were made.

Because of the EU rule allowing VAT to be paid in the country of final destination, as opposed to upon entry to the community, some criminals had set up shell companies which later vanished having distributed the goods throughout Europe leaving the authorities with nobody to collect the revenue from.