Spain Arrests 40 Fraudsters

More than forty people across eight regions in Spain were arrested last week in the biggest carousel tax fraud investigation in Spanish history, as France puts the spanner in the UK’s reverse charge system.

The Spanish group are alleged to be involved in a scheme to avoid VAT payments worth around €400 million on mobile phone equipment supplied by the Infinity Systems company.

The detainees were suspected of sourcing computer and mobile phone materials from other European Union countries where the products were free of VAT then importing them into Spain through a phantom company, and sold on without anyone paying Spanish VAT (IVA).

One suspect arrested was Bernabe Noya, owner of the telecommunications company Meflur, along with two other people linked to the same company.

Spanish Tax Office general director, Luis Pedroche, confirmed at a press conference that more than thirty properties have been searched, including those of computer producers and telecommunications companiesafter several telephone lines were tapped.

The UK’s war on Carousel fraud is still facing difficulties as France objects to HMRC’s VAT reverse charge proposal.

Germany and Austria have objected because their request to implement the reverse charge more broadly was refused earlier this year. France, backed by Portugal and Spain were concerned that such a change would result in scammers shifting their operations to other countries and products, possibly undermining the entire sales tax system.

‘The Germans and Austrians are not happy. Other states don’t like the reverse charge mechanism at all, such as France, as they consider it will create fraud in different ways,’ an EU diplomat said.