VAT Fraud and Carousel Scams: Serious and Complex Financial Crimes
VAT fraud and carousel scams represent some of the most serious and complex forms of tax evasion in Europe and internationally. These offenses often involve companies, entrepreneurs, and professionals engaged in intra-community trade and can result in severe criminal and financial consequences.
In recent years, tax and judicial authorities have strengthened cross-border cooperation to combat these crimes. Therefore, understanding how these mechanisms work and what legal defense strategies exist is essential for anyone involved in such proceedings.
What Is VAT Fraud?
VAT (Value Added Tax) fraud occurs when a company evades paying VAT, thereby avoiding its tax obligations under the law. This is done through various fraudulent schemes, such as:
- Fake invoicing
- Shell or phantom companies
- Failure to file VAT returns
- Simulated or inflated transactions
The goal is always to obtain an unlawful tax advantage and generate illicit profits at the expense of the state.
What Is a Carousel Scam?
The carousel scam is a particularly sophisticated form of VAT fraud that exploits intra-community trade regulations. The scheme involves the purchase and resale of goods among multiple companies in different EU member states, with the aim of not paying the VAT due.
How a carousel scheme works:
- A company purchases goods from another EU country without applying VAT (exempt under intra-community rules).
- The same company resells the goods with VAT added, which it collects but never remits to the state.
- The company then “disappears” or is dissolved, leaving a tax gap.
- The goods can be resold multiple times through a chain of shell companies.
This type of scheme is often connected to international criminal networks and can cause significant economic damage to national budgets.
Related Offenses and Legal Consequences
Anyone who knowingly or unknowingly participates in VAT fraud or a carousel scheme may be charged with serious crimes, such as:
- Aggravated tax evasion
- Issuing and using invoices for non-existent transactions
- Criminal conspiracy aimed at committing tax fraud
- Money laundering and self-laundering
- Failure to report income or VAT
Possible consequences include:
- Preventive arrest
- Seizure of assets and bank accounts
- Inclusion in Interpol databases
- Extradition requests from involved states
The complexity and seriousness of these proceedings require highly specialized legal expertise in tax, criminal, and international law.
Legal Defense Strategies for VAT Fraud and Carousel Scams
Defense in cases of VAT fraud or carousel scams must be based on solid documentation and accounting analysis, along with a careful assessment of the international context of the investigation.
Key legal defense strategies include:
- Technical analysis of company accounting to prove the legitimacy of transactions
- Demonstrating the absence of intent or lack of awareness of the fraud
- Appeals against asset seizures and precautionary measures
- Opposition to European arrest warrants and extradition requests
- Cooperation with tax authorities to clarify the defendant’s position or negotiate reduced penalties
It is also essential to assess the appropriate jurisdiction, especially if the person is abroad, to determine where and how to structure the most effective legal defense.