Tuesday, August 04, 2009

Robbing us blind

Something which perhaps should be given more publicity than it is getting is the bizarre story retailed in The Financial Times about the urgent action taken by HMG to zero rate carbon credits to put a lid on VAT fraud.

That carbon credits – the ultimate "snake oil" product – should have become a major vehicle for VAT fraud is hugely ironic, but one is not comforted by the FT's assurance that: "Losses to the exchequer so far are unlikely to have exceeded a few hundred million pounds."

Er ... "few hundred million pounds"? If this had been a robbery of that magnitude, it would be spread all over the front pages. So why the diffidence? This is major-league theft – real money, straight out of our pockets.

Such is the seriousness of the situation that the Treasury is warning that "there now exists a substantiated and increasing risk of the UK becoming a major target for the fraudsters during the next few months". It had taken the action even though changes to VAT need to be agreed by the EU Commission, without even waiting for formal approval.

The scam, it seems, also has international dimensions, with similar action having been taken by France and the Netherlands, pre-empting what is feared to be fraud on an industrial scale, with billions at risk.

This, however, is the tip of the iceberg, exposing yet another vulnerability in a system massively prone to fraud which has cost the exchequers of EU countries billions.

Yet the scale of the fraud is matched only by the degree of under-reporting in the media, which seems not to register the magnitude of this crime and the fact that we are indeed talking about real money. This is not a victim-less crime.

The real problem, though, is the inherent nature of VAT itself and the only long-term solution is to abandon the system completely. Yet that very system is locked into the very heart of the EU – another colossal failure of the project. That, presumably, is why no one wants to talk about it.

And that, this time, the fraud should be perpetrated on the back of what amounts to another fraud – carbon credits – should give us all pause for thought.