Richard Cornelisse

EUROPA – Press Releases – Algirdas Šemeta European Commissioner /Brussels 11 July 2012

In Tax News on 11/07/2012 at 3:13 pm

Statement Following Commission Proposal To Protect Financial Interests Of The EU

Today’s proposal ties in to the overriding theme in the EU today.

Just as we are united in our shared economic interests, so we must be united in safeguarding them. Greater coordination of national policies is not an option – it is a requirement for our common well-being.

This is as true for the protection of EU funds as it is for re-building national economies.

We cannot share a common pot to invest in infrastructure, create jobs, support our farmers and promote research, and yet take 27 different approaches to protecting the money.

This is becomes all the more evident when we see that the more lapse approach in some Member States is undermining the more diligent work of others.

The statistics tell it all. Conviction rates for fraud range from 80% to as low as 14%, depending on the Member State in question.

And penalties for the same crime range from many years in jail to a mere fine, depending where you are in the EU.

If ever there was an incentive for fraudsters to exploit European borders to their advantage, this is it.

We therefore need a more unified, harmonised stance in criminal law when it comes to protecting the EU’s financial interests and tackling fraud.


At EU level, we have a robust framework in place to protect the EU budget. And it is one that the Commission is constantly working to reinforce.

In addition to multi-level rules, controls and audits for EU funds, we have the European Anti-Fraud Office. Since 1999, OLAF has investigated around 5000 cases of suspected fraud involving EU money.

It has become a cornerstone in protecting our common budget and in fighting fraud. Moreover, work is underway to make OLAF even stronger and more efficient, through the reforms that I proposed last year.

However, OLAF is only one cog in the machine – albeit a very important one.

If the Member States don’t follow up on OLAF’s findings;

If they don’t actively pursue suspicions of fraud involving EU funds;

If they don’t adequately penalise such offences;

Then the fraudsters win.

And when fraudsters win, the honest tax-payers lose.

Limitation Periods And Confiscation

The proposal that we are presenting today therefore seeks to close national loopholes.

It seeks to create a more harmonised and more effective approach to deterring and punishing fraud.

And it seeks to send a clear message that fraud will not be tolerated, regardless of where it takes place in the EU.

In addition to the sanctions and common definitions that Viviane has just outlined, today’s proposal sets down minimum statutes of limitation.

At the moment, national statutes of limitation are adapted to the needs of fighting national fraud cases. However, they are often insufficient for cross-border investigations, given the extra time and complexity these involve.

So our proposal will greatly facilitate investigators and prosecutors, by providing them with adequate time to do their work.

We have also included provisions for the confiscation of goods linked to the offences in question. This links up with Commissioner Malmstrom’s proposal earlier this year on the confiscation and freezing of criminal assets.

Confiscation will increase the chances of recovering illegally used funds, which is essential in protecting the EU budget.


To conclude, let’s remember what we are ultimately talking about today.

We are talking about upholding two fundamental principles that must underlie all policies in a democratic society: Justice and Fairness.

Justice in the form of an even-handed approach to fraud, wherever it occurs in Europe.

We need punishments that fit the crime and a clear deterrent to those considering de-frauding the EU budget.

And fairness for the honest citizens, who are left out of pocket when EU money is lost to fraud.

Because the EU budget is not for “Brussels”. It is for villages, towns and regions; workers, students and pensioners across Europe.

It is a key contributor to our growth agenda. And we must take every measure we can to protect it.

EUROPA – Press Releases – Algirdas Šemeta European Commissioner for taxation, Customs Union, Anti-Fraud, Audit and Statistics Statement following Commission proposal to protect financial interests of the EU PRESS CONFERENCE ON PIF DIRECTIVE /Brussels 11 July 2012.

Why needed?

Here are a couple of 2012 examples:

  • “Nasir Khan had a successful accessories business, a jet-set lifestyle and reputation as a pillar of the community. But all that vanished in December when he was jailed for his part in a £250m VAT fraud. Jasper Jackson discovers how a 10-year investigation by HMRC led to his downfall. By Jasper Jackson – Mobile News March, 2012
  • “Two men have been jailed for their role in a plot to smuggle nearly 24 million counterfeit cigarettes into the Midlands, following an investigation by HM Revenue & Customs (HMRC). The conspiracy would have seen nearly £4 million drained from the UK economy through duty evasion.” HM Revenue & Customs, March, 2012
  • “A 34-YEAR-OLD man was yesterday convicted of a €680,000 VAT fraud after a 10-day trial that heard he produced 141 bogus invoices on non-existent transactions with imaginary sub-contractors.” By Gordon Deegan – Irish, March 2012
  • “A 64-year-old man has been arrested in a dawn raid into a £1 million suspected VAT fraud involving a Workington business.” News & Star, January 2012
  • “Yacht broker jailed over VAT fraud – A Dorset yacht broker who charged £210,000 VAT on the sale of six luxury yachts and then pocketed the cash has been jailed. James Williams, 51 was found guilty on six counts of cheating the public revenue and one count of false accounting. He was sent to prison for three years. John Cooper, HMRC Assistant Director Criminal Investigation said: Williams used his position as director of a yacht brokers to commit VAT fraud. He sold boats which had previously been supplied VAT-free for export to the Channel Islands, but failed to account for the VAT on their subsequent sale in the UK. This blatant attack on the tax system not only robbed the Exchequer of public funds, but is also unfair to those businesses that diligently abide by the rules. Tackling VAT fraud is a priority for us and we will not hesitate to pursue those who commit this type of offence. Anyone who has information about suspected VAT fraud can call the Customs’ Hotline on 0800 59 5000 or email” By Dick Durham of Yachting Monthly, March 23, 2012
  • “An antique jewellery trader who fraudulently claimed over £1.6 million in VAT repayments by creating fake invoices for expensive Rolex and Cartier watches has been jailed. Jonathan Uri Shohet (45) of Baldock, Herts, used stolen invoice books and fake invoices to claim back VAT from HM Revenue & Customs (HMRC) but had never purchased many of the watches he claimed repayments for.” HM Revenue & Customs, April 25, 2012
  • “A 15-STRONG GANG has been found guilty of an attempted £176m VAT fraud by engaging in complex mobile trading scams.Ring leader Dilawar Ravjani received a 17-year stretch in prison for his part in the scheme, the longest sentence handed down in the UK for this type of fraud.  The gang claimed it sold four million mobile phones worth £1.7bn, despite failing to prove the existence of many of these, while about 250,000 were not yet launched in the UK. In order to give the operation a veneer of legitimacy, more than 5,700 false business transactions were created in order to claim large amounts of VAT. Confiscation proceedings are now underway to recover any assets the gang members received as a result of this crime. The actual tax loss totalled £107m.” Read more: Carousel fraud gang jailed – Accountancy Age, July 12, 2012

Related Topics

Richard Cornelisse is CEO of the KEY Group and worked previously as Big4 Partner in the Tax Performance Advisory and Indirect Tax Practice and blogs on Tax Function Effectiveness and Tax Control Framework developments.

Tax Management Consultancy welcomes your opinion on any of the issues raised, so feel free to join in the discussion on LinkedIn | Twitter | Facebook.

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