Two people have been placed under house arrest in Italy as part of an investigation into an alleged €33 million VAT fraud involving the import of clothing from China into the EU.
The order was issued by a judge for preliminary investigations at the Court of Milan at the request of the European Public Prosecutor’s Office (EPPO) in Venice, EPPO announced on Monday.
Investigators from Italy’s financial police — the Guardia di Finanza in Venice — identified a Chinese couple based in Milan as the main suspects.
The couple are suspected of managing and using several companies in what prosecutors described as a “VAT carousel fraud”.
VAT, or value added tax, is a sales tax charged on most goods and services.
EPPO said the alleged scheme was used to conceal the unlawful introduction of goods into Italy and their resale on the domestic market without paying the VAT due on the sales.
The businesses involved were formally run by “front persons” with no criminal records and no assets, and they may not have been aware of the alleged offences committed through the companies for which they were registered as directors.
Seizures ordered, but limited recovery reported
An analysis of the companies’ activities found that many “missing trader” firms recorded sales worth millions of euros but did not meet tax reporting obligations, leading to VAT evasion estimated at more than €33.4 million, EPPO said.
A “missing trader” is a company that charges VAT on sales but disappears without paying it to the tax authorities.
A judge ordered the seizure of assets equal to the alleged damage, but the measure could only be carried out to a limited extent because investigators could not find funds or assets attributable to the suspects in Italy. Searches were also carried out at the suspects’ homes.
All people concerned are presumed innocent until proved guilty by a final judgment in the competent Italian courts, EPPO said.
