Carousel fraud

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Carousel fraud, which is also called missing trader fraud, occurs when an individual or company imports goods from a country without the value added tax or VAT and then sells those goods to domestic buyers and charges them the VAT. The sellers then disappear without paying the VAT tax that they collected.[1][2]

Carousel fraud entered the EU Emissions Trading Scheme in May 2009 when fraudsters purchased carbon credits from one EU member country that did not have a VAT and then resold them to a domestic customer with the VAT included in the price, usually at a rate of about 15 percent.[3] Those credits were sold on spot carbon exchanges such as BlueNext and Climex, boosting volumes dramatically.

An October 2009 study from New Energy Finance said that daily spot volumes on BlueNext hit 19.2 million contracts on June 2, 2009, up from the average daily volumes of 2.2 million contracts for the rest of the month. After French authorities took action, volumes fell 133 percent for the rest of the month. [4]

France and UK removed the VAT tax from carbon credits to reduce the fraud and the Netherlands changed its VAT rule so that the seller, not the buyer, pay the VAT.[5]

In August 2009, European police agency Europol arrested several people in connection with the carbon credit tax fraud which was estimated at 38 million British pounds ($62.8 million).[6]

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