The British International Freight Association (BIFA) has sent a stark warning to its members to be vigilant of VAT fraud following the recent introduction of the Union Customs Code across the European Union.
BIFA, representing 1500 forwarders, warns that United Kingdom customs is placing an “ever-increasing emphasis on compliance.”
The main issue facing EU treasuries is the difference between VAT due and the amount collected, which amounted to EUR168 billion (US$190.72 billion) in 2013 according to the latest European Commission annual report on the VAT Gap.
The report concluded, “In real terms this amounts to a VAT shortfall due to fraud and evasion, tax avoidance, bankruptcies and simple miscalculation.”
According to BIFA director general, Robert Keen, the problem is that the trade has moved on significantly, while regulators have reacted slowly to these changes.
BIFA recommends forwarders and their customers carry out due diligence checks on new customers including obtaining, where appropriate, VAT and Deferment numbers.
The main problem areas are with Internet Trading and the Onward Supply Relief; freight forwarders are becoming particularly sceptical about Internet-based trade where the declarant is based outside of the EU.
“Always challenge the use of multiple economic operator registration and identifications (EORI) by single entities; and incorporate BIFA Standard Trading Conditions into any contract,” Mr. Keen was quoted in the BIFA newsletter.
Mr. Keen concludes, “It is clear that a minority of businesses are established to make money through fraud and other illegal activities. Asking relevant questions will likely result in those engaged in fraud to look to less diligent partners with whom to conduct business.”
Part of the problem is that it is “very difficult to identify who the buyer and seller are. Where the goods are received on a (Delivery Duty Paid) DDP basis and local taxes are invoiced outside the EU, there is no guarantee that the VAT will be added to the value of the goods”.