VAT FRAUD (6859/08)
Letter from Rt Hon Jane Kennedy MP, Financial
Secretary, HM Treasury, to the Chairman
The European Commission have recently issued
a Communication and Staff Working Paper on measures to change
the VAT system to fight fraud. I have today sent an Explanatory
Memorandum to the Scrutiny Committees on these documents and knowing
your interest in the issue of Missing Trader Intra Community VAT
fraud, I felt that it would be helpful to provide you with an
update on the latest position.
The outlook is far better than it was at the
time that you were conducting your enquiry in 2007. According
to the latest estimates of VAT fraud produced by HMRC, estimated
attempted fraud fell in 2006-07 from £3.5 billion—£4.75 billion
to £2.25 billion—£3.25 billion. The
impact on VAT receipts shows a drop from £2 billion—£3 billion
to £1 billion—£2 billion. Trade statistics
based on data collected and provided by HMRC, indicate that the
reduction in attempted fraud has continued and has been sustained
through 2007-08. Estimates of the impact of MTIC on the balance
of payments in recent months put it at less than £100 million
per month, down from the peak of £4.8 billion in March
2006.
The indications are that, through a combination
of operational measures and the introduction of the targeted Reverse
Charge, the UK has succeeded in significantly reducing MTIC VAT
fraud. In addition, our emerging initial assessment of the targeted
Reverse Charge shows no indication of a migration of MTIC trade
to other Member States. Within the UK, although there have been
some attempts at using commodities other than mobile telephones
and computer chips (CPUs), fraudsters have found it difficult
to move to other goods which have the same demand, size and cost
profile. To date, HMRC are not aware of widespread mutation and
have been able to take effective action in the cases that they
have found. HMRC, however, remain alert to the possibility of
new or variant frauds and are carefully monitoring the situation.
I would, of course, be happy to respond to any
further questions that you might have arising from either this
short update or the EM that it accompanies.
1 March 2008
Letter from the Chairman to the Rt Hon
Jane Kennedy MP
Thank you for your Explanatory Memorandum 6859/08 and
your letter dated 1 March. Both items were considered by
Sub-Committee A on 1 April. The Sub-Committee cleared the
Memorandum from scrutiny. The Sub-Committee have asked me to thank
you for the additional information that you provided in the letter.
The Sub-Committee remain concerned about the size of the impact
on the balance of payments and hope that this will continue to
fall. The Members of the Sub-Committee would therefore be grateful
if you were able to provide further updates as more data becomes
available.
2 April 2008
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