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)