"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "


Chinese premier Wen Jiabao 12th March 2009


""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."


Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Tuesday, October 09, 2007

Chancellor announces 92% drop in VAT carousel fraud (MTIC) ..... Street festivals, joy is unconfined... medals and knighthoods all round

Alastair Darling introduced his 2007 Pre-Budget report today, (286 pages) coyly entitled "Meeting the aspirations of the British people" . The Office of national Statistics also produced simultaneously, "UK Trade 1st Release " from which the adjacent table is extracted from page 8 showing the MTIC fraud trade adjustment = Carousel VAT fraud as calculated by the Office National Statistics - NB this is the first time these figures have been accumulated, displayed and published in this form.

On Page 3 (instead of a picture of big tits) there is a note ...

Changes in trade associated with VAT MTIC fraud mean that comparisons of volume and prices (both including and excluding trade associated with VAT MTIC fraud) should be treated with a great deal of caution.
In the Chancellors statement / Document it is worth pondering on Page 27 ...


2.26 The deficit on the current balance in 2006-07 is £4.7 Bn. lower than expected at the Budget, as shown in Table 2.2. This is lower in 2006-07 due to continued success in tackling MTIC fraud and growth in consumer expenditure feeding through to higher-than-expected VAT payments. The deficit is also reduced by lower government expenditure than expected at the Budget, in particular spending by local authorities. The 2006-07 outturn for net borrowing is £3.9 Bn. lower than the Budget 2007 estimate.

At Page 98 we have ....

5.104 New estimates of Missing Trader Intra Community (MTIC) fraud, published today,show that the scale of attempted fraud fell by up to £1.5 Bn.in 2006-07, to between £2.25 Bn. and £3.25 Bn. The estimated impact on VAT receipts fell to between £1 Bn. and £2 Bn. These reduced estimates demonstrate the success of the Government’s strategy for tackling MTIC fraud. HMRC will take further steps to apply both criminal and civil sanctions to those who are found to be knowingly involved in fraudulent trading.

At Page 174 we can note that ....


B.47 Cash receipts of VAT in 2007-08 are expected to be £1.4 Bn. above the Budget 2007 forecast, helped by the continuing success of the government's strategy for tackling Missing Trader Intra-Community (MTIC) fraud and a stronger-than-expected rise in nominal consumer spending in the first half of 2007. Consumer spending accounts for around two thirds of the VAT base and the stronger growth reflected both higher inflation and real spending growth, above the Budget 2007 forecast range.
Finally on Page 154

A.62 As set out in Budget 2007, annual growth in recorded exports and imports and services has been distorted by activity related to missing trader intra-community (MTIC), which significantly inflated the value of measured goods trade in the first half Since the second half of 2006, Government measures to tackle MTIC fraud have led to fall in estimated MTIC-related activity, to a low level. In view of inevitable measurement difficulties involved in estimating MTIC-related activity, the ONS advises that comparisons trade volumes and prices “should be treated with a great deal of caution”. The abstracts from MTIC effects by assuming that beyond the latest quarter of data, export import volumes grow in line with underlying trade, excluding MTIC-related activity.The forecast is therefore based on the neutral assumption that the level of MTIC-related remains constant throughout the forecast at the latest quarterly estimate.
So the assault on MTIC fraud has been cut back in 2006 from the VAT on an estimated Total of £ 22.6 Bn. in 2006 to £800 Mn. in the first 8 months of 2007 ! Extraordinary. Something there to trumpet about ...if ...er ...true.... but Cave ! "Changes in trade associated with VAT MTIC fraud ...blah ...blah ... should be treated with a great deal of caution." Too fucking right pal.

Special notes to the ONS figures Page 7 are lengthy and one might just extract....


" ...Changes to the pattern of trading associated with MTIC fraud can make it difficult to analyse trade by commodity group and by country as changes in the impact of activity associated with this fraud affect both imports and exports. Originally, most carousel chains only involved EU member states. From 2004 in particular, some carousel chains have included non-EU countries, for example, Dubai and Switzerland...."


Now VAT at 17.5% on £22 Bbn. worth of goods is ...say £3.8 Bn. so that means VAT receipts should rise for the 8 months of 2007 by say ... £3 Bn.

But the Chancellor says B 47 Page 174 ...

"Cash receipts of VAT in 2007-08 are expected to be £1.4 Bn. above the Budget 2007 forecast, helped by the continuing success of the government's strategy for tackling Missing Trader Intra-Community (MTIC) fraud and a stronger-than-expected rise in nominal consumer spending in the first half of 2007. Consumer spending accounts for around two thirds of the VAT base and the stronger growth reflected both higher inflation and real spending growth, above the Budget 2007 forecast range."

So 2/3 rds of the £1.4 Bn rise is ...say .. £1 Bn. leaving a rise due to the "continuing success of the government's strategy for tackling Missing Trader Intra-Community (MTIC) fraud " of ..er.... £400 Mn.

So VAT receipts should rise this year by £3 Bn. because of the "continuing success of the government's strategy for tackling Missing Trader Intra-Community (MTIC) fraud " but the best estimate is that it will actually be only £400 Mn!!!!

.....Hmmmm. Well they did warn you.

Changes in trade associated with VAT MTIC fraud mean that comparisons of volume and prices (both including and excluding trade associated with VAT MTIC fraud) should be treated with a great deal of caution.

Apologies for the detailed and lengthy explanation, there is no way to reduce it regrettably... When the Gubment set out to confuse and obfuscate they do it in style. But you have to say that the claimed success in controlling MTIC fraud is stunning and the unwillngness to broadcast and publicise their success is really quite startling.... in fact it must count as one of the most successful criminal investigation successes of all time.

Mr Murphy at tax report calculates loss of uncollected Taxes / VAT etc., at £80 BN. (ish)

6 comments:

Anonymous said...

It seems the government can turn on or off VAT fraud at will. The question must be who's controlling the fraud.

Anonymous said...

These criminal activities seem to go in phases; drugs in the early 1990s, excise fraud in the middle and late 1990s culminating in the exposure of a participating informant in the London City Bond case. From around 1995 to 2005 carousel frauds using computer chips and mobile phones dominated the scene.

Anonymous said...

It's odd that everyone charged with carousel fraud in the UK between 2004 and 2006 had a bank account at the First Curacao International Bank. It sounds as if they're all part of the same gang which begs the question who's running the frauds particularly as they all stem from the UK? Surely, with all the expertise at HMRC they must know. Why can't they let us in on the secret.

Shutter said...

It is also evident that of some of the cases that have reached the courts, some of the participants are self evidently front men/women and that there is a funding organisation behind them.

Also if we accept that the 2006 Financial year total of trade affected by VAT is £22 BN.ish ( nearly £2 Bn a month !!) the level of success in disclosing trade is of the order of at most over the period ..say.. 2000 - to present day at most £500 Mn. which must be some few % of the trade.

The recovery of assets / funds is of course only a tiny fraction of the fraud disclosed.

.. and this has resulted in the almost total disappearance of the trade for 2007 ?

Hmmmm.

Anonymous said...

It's important in a carousel to see where the initial funding comes from. Whether it's the UK broker/exporter or the EU supplier? Litle if any investigation appears to be done in these areas. So are the defendants in court just a screen? Who's got the billions that HMCR doesn't seem able to find?

Shutter said...

see also Tax report
http://www.taxresearch.org.uk/Blog/2007/10/10/the-uk-tax-gap-exceeds-%c2%a380-billion/

(C) Very Seriously Disorganised Criminals 2002/3/4/5/6/7/8/9 - copy anything you wish