Ink fraud scandal: Three convicted in €58m VAT carousel scheme
December 20, 2024
Three individuals have been convicted in Italy for their roles in a €58 million VAT fraud scheme exploiting cross-border tax exemptions.
Two entrepreneurs from Padua—a father and son—were sentenced to six years and two months each. An accountant received a two-year and two-month sentence, while a figurehead was sentenced to two years and one month. These convictions, secured via an abbreviated procedure under Italy’s Code of Criminal Procedure, remain subject to appeal. The identities of the father and son, as well as the other individuals involved, have not been publicly disclosed. This is a common approach in legal proceedings, particularly when cases are under appeal or involve ongoing investigations.
As previously reported by The Recycler, the fraudsters engaged in a “VAT carousel” scheme. This sophisticated fraud involves importing goods VAT-free, selling them domestically with VAT included, and failing to remit the taxes to authorities. The goods are often exported and re-imported, creating a “carousel” effect that amplifies fraudulent VAT refunds. In this case, the scheme allowed the conspirators to sell office supplies and printer consumables at prices that significantly undercut legitimate businesses.
The investigation exposed a network of over 100 suspects linked to shell companies in Italy’s Triveneto region, with ties across the EU. Fraudulent profits were laundered through investments in real estate, catering, and tourism ventures. Earlier phases of the investigation resulted in the seizure of luxury cars, properties, and cash from 20 companies and 15 suspects. Authorities have praised the EPPO’s efforts, noting the complexity of dismantling such an extensive and well-orchestrated operation.
The Financial Times has also reported (subscription) on a similar VAT fraud case involving organised crime groups, including the Camorra and Cosa Nostra. This €1.3 billion scheme focused on electronics, such as laptops and earpods, and led to the seizure of €520 million in assets. These cases highlight the diverse sectors targeted by fraudsters and the far-reaching consequences of VAT evasion.
Romania, faces its own VAT compliance challenges. The country consistently records the EU’s highest VAT gap, with over a third of expected revenues uncollected—estimated at 36.7% in 2021. Carousel fraud, often involving fictitious exports and undervalued imports, continues to disrupt fair market competition. Fraudsters exploit cross-border VAT exemptions, claiming refunds on taxes they never paid, further deepening the gap and distorting the market.
While the convictions in the “Cheap Ink” case mark progress, experts caution that VAT fraud remains a significant threat to the EU’s economic integrity. Stronger cross-border cooperation, advanced tracking technologies, and robust enforcement are essential to closing these gaps and protecting fair competition.
Footnote: Does the office imaging industry have a VAT problem? The “Cheap Ink” investigation highlights the sector’s vulnerability to VAT fraud. With its high value, easily transported goods, and fragmented compliance landscape across the EU, the industry is particularly susceptible to exploitation through schemes like VAT carousel fraud. Addressing these challenges may require a combination of stricter enforcement, improved cross-border cooperation, and industry-led initiatives to ensure compliance and protect legitimate businesses.
Categories : World Focus
