Five arrested for €38 million VAT fraud

Five people have been arrested in an investigation into VAT, according to reports today. Requiring over 2,000 international tax and customs officials as well as the police, the members of a criminal gang have been detained.

The €38 million in unpaid VAT was raised in the sale of over 10,000 cars by an alleged crime gang. Operation Huracán was led by the European Public Prosecutor’s Office (EPPO) in Cologne. The criminal gang is believed to have a vast network of contacts with suspicions first raised over tax inconsistencies in Italy.

Their modus operandi apparently involves a German shell company, through which they processed the first purchase of cars from a German car dealer, claiming the VAT back through the German state. These cars were then sold internationally to Italy and Hungary.

The sale to so-called ‘missing traders’ meant that inter-community VAT exemption laws were triggered. These traders were then able to sell the cars at a lower price, with VAT added but then never paid into the respective country’s state coffers, allowing for large profit margins.

There are thought to have been around 60 people involved in the scam, which generated more than €225 million in sales between 2017 and 2023 and saw over €38 million in unpaid VAT pocketed by the gang. Doctored invoices were given to people who bought the cars, making everything appear legitimate.

The scam meant that cars could be sold for below market value, allowing unfair trading and the allegations go beyond tax evasion, encompassing, organised crime, money laundering and falsification of documents.

Europol cross-checked the information from the EPPO and reported back any relevant findings as well as aiding information exchanges between authorities in affected EU states. They worked in conjunction with Belgium’s Federal Police (Federale Politie), numerous German and Hungarian tax authorities as well as the German Federal Criminal Police Office (Bundeskriminalamt).

Police forces in Italy, Netherlands, Portugal and Spain were also involved in the investigation, making it a very European operation and showing how strong international cooperation can bring large-scale criminals to justice.

With five now arrested and potentially many more to follow we will keep you posted on how this case progresses.