In ‘carousel frauds’, imported goods may be sold from one trader to another, and eventually exported. The exporter can claim back the whole of the VAT from the Government that should have been paid on the goods. However, if there is a “missing trader” in the chain of sales, part of this VAT was never paid in the first place and this can repeat many times, with the goods going round in a ‘carousel’.
An example of MTIC fraud is when goods are zero-rated in the country of origin, and VAT on the goods should be paid in the country where they have been imported. After importation, the goods are sold to another trader charging the price of the goods plus VAT. The trader doesn’t pass on the VAT to the Government. This trader becomes a “missing trader”. The buyer who paid VAT to the missing trader claims a deduction for the same VAT amount on his VAT return. The same goods will then be shipped on again at zero-rated VAT for export meaning the Government has lost the entire VAT that should be paid on the goods. This type of fraud, where goods are made available for consumers in the importer’s home market is often known as ‘acquisition fraud’.
