Ten searches were launched into Chinese logistics and commercial companies based at the international freight sections of Liège Airport and the port of Zeebrugge on Tuesday morning as part of an investigation by the European Public Prosecutor’s Office (EPPO) into alleged VAT fraud, Le Soir reports.
The Public Prosecutor’s Office, confirming information from the Belgian daily newspaper, reports that the Chinese companies eluded at least €303 million in taxes. So far, four people have been arrested and searches are underway in the homes of suspects in Ans, Visé, and Liège.
In total, over 100 police officers, customs officers, and tax officials have been mobilised as part of the operation carried out by the Central Office for the Fight against Organised Economic and Financial Crime (OECDFO). The investigation is being supported by agents from the Federal Judicial Police, and Europol, who dubbed the operation “Silk Road.”
The fraud is believed to be related to the EU’s CP 42 scheme, which grants VAT exemptions to goods imported into the EU transiting through another Member State, in this case Belgium.
Investigators believe that numerous companies, including three private customs agencies, were transiting Chinese goods through Belgium and requesting the VAT exemption, but ultimately failing to pay VAT to another country and still passing the cost onto the customer. This fraud is known as a “missing trader” scheme. The fraudster mostly trafficked electronic devices, toys, and other miscellaneous goods.
“To do this, they allegedly used front companies located in France, Germany, Hungary, Italy, Poland, and Spain, using false invoices and falsified transport documents. In some cases they reportedly used the names of real companies, which were unaware that their VAT numbers and their identities had been stolen,” the European Prosecutor’s Office told Le Soir.
As the VAT is ultimately not paid to Belgium or the country where the company sells the goods, the fraud scheme is extremely lucrative. The prosecution estimates that the company succeeded in evading €303 million in VAT and €6.6 million in customs duties.
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The EPPO is a young institution, and was established in particular to investigate VAT fraud, which eats away at state budgets. The investigation, conducted by the Belgian branch of this investigative bureau, is one of the EPPO’s biggest cases yet.
Belgium appears to be a hotspot for VAT fraud, with around 40 open investigations looking into around €1.2 billion in fraud, of which VAT fraud accounted for over a quarter. This new case alone accounts for almost half of the estimated amount of VAT fraud being investigated in Belgium.