UK and UAE sign treaty to tackle VAT fraud

The United Kingdom (UK) and UAE governments have signed a treaty of cooperation in a bid to clampdown on VAT fraud carousels operating in Britain and Dubai.

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By  Administrator Published  December 31, 2006

The United Kingdom (UK) and UAE governments have signed a treaty of cooperation in a bid to clampdown on VAT fraud carousels operating in Britain and Dubai.

The accord calls for UK and UAE authorities to cooperate on tracking shipments suspected of being part of VAT carousels. It also enables the UK government to extradite suspects from the UAE.

Organisations involved in VAT fraud employed increasingly sophisticated techniques – including software applications that mirror phantom shipments – to defraud the UK government of billions of dollars in 2006. Dubai’s liberal trading environment and growing reputation as a base for re-export trade makes it an ideal proposition for these organisations, according to a UK Customs official who spoke to ECN.

“Success in tackling VAT fraud within the EU has prompted these organisations to target non-EU economies in order to avoid verification procedures,” he said. “Consumer electronics and mobile phones in particular are the preferred products of VAT fraudsters due to their relative value and availability.”

According to UK press reports, authorities believe that around 90% of VAT carousel revenue is laundered through Dubai’s banks.

The scale of the problem has prompted some industry pundits to identify organised crime gangs as the main offenders in the scam.

One source, who wished to remain anonymous, said: “The sophistication and scale of the operations defi - nitely suggests the involvement of organised crime syndicates, which are taking advantage of deregulated markets such as Dubai.

“These new regulations should address the situation and safeguard legitimate traders from naively getting caught up in the affair.”

A spokesperson for the Dubai Customs Authority told ECN: “We signed a memorandum of understanding with the British government in 2005. We have subsequently reduced the level of carousel fraud.”

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