The marketing people at the Italian car manufacturer have chosen a programmatic name for the Lamborghini Huracán. It’s supposed to be a car like a hurricane, its thunder can be heard from afar when someone rolls up with one of these 640 hp sleds. In three seconds to a hundred, hard to tame, the ultimate swank. Huracán: That’s what hurricanes and hurricanes are called in Spanish. And that is the not coincidentally ambiguous code name of an action with which investigators in several European countries smashed a network of suspected VAT fraudsters this week. They are said to have traded in luxury cars for years just to evade taxes.
On Wednesday morning, 2,000 investigators went to seven European countries, searched 450 locations, confiscated houses and cars, and arrested five people. For years, the alleged gang moved more than 10,000 cars, mainly from Germany to Italy and Hungary. What looked like a normal trade in vehicles is said to have actually served to exempt the German state. The suspects had made a turnover of 225 million euros. And collected 38 million euros in taxes, illegally, in order to enrich himself. The European public prosecutor’s office in Luxembourg coordinated the investigations, their delegation in Cologne led them for Germany, and tax investigators, financial and federal police, customs authorities and Europol were involved across Europe.
The case reveals a lot about the ongoing problem of VAT fraud, one of the biggest crime phenomena of our time, which Europol estimates costs Europe’s taxpayers 50 billion euros a year. And he once again talks about the success of the European Public Prosecutor’s Office (EUPO) project, with which 19 EU states have bundled the prosecution of subsidy fraud at the expense of the EU and VAT carousels in one authority. Such huge actions, simultaneously in seven countries? Would have been difficult years ago.
A well-known scheme, but difficult to discover
The investigations began with a tip from an Italian tax office to the Federal Central Tax Office in Bonn. As a result, the tax investigation in Münster became active after suspicious companies in North Rhine-Westphalia were noticed. The European Public Prosecutor’s Office took over the case and “soon afterwards uncovered a large-scale international VAT fraud scheme run by an organized crime group,” the agency said.
The scheme can be transferred to the trade in other products: electrical appliances, furniture, even intangible goods such as CO₂ certificates. It is well known to the authorities but difficult to detect and therefore still widespread. In this case, a company in Germany first buys cars from an online dealer, pays VAT for each and gets it back from the tax office. Then she exports the vehicles, in this case to Italy and Hungary, and collects a slightly higher amount than the German net price.
The buyer is a so-called “missing trader”: A company abroad that does not have to pay German VAT for the purchase. She resells the cars directly at an attractive price to end customers abroad – again including VAT, which she no longer pays. The company simply disappears, the perpetrators have it deleted from the register, and the illegally collected taxes remain in the network of car smugglers.
More than 1600 cars a year, more than six million euros annual profit
From 2017 to the last that should have run, makes more than 1600 cars a year and more than six million euros annual profit. The searches were still ongoing on Thursday, which is why, according to the European Public Prosecutor’s Office, it was still unclear how many cars they would eventually confiscate and how many of the more than 60 suspects were provisionally arrested. However, it was already clear that this was one of the more spectacular cases of the still young Luxembourg authority – and the first publicly known one in which the German tax authorities were said to have been damaged by such a large sum.
The EPPO only started its work in June 2021. With the authority, the EU states have for the first time created a Europe-wide competent body in the field of criminal prosecution and thus partially communitized an original national responsibility. So far 22 Member States have joined the project: Poland, Hungary and Sweden are out; Denmark and Ireland only participate with reservations. The EPPO first and foremost takes on all cases in which the EU budget (2021 expenditure: 228 billion euros) suffers financial damage. So it’s about subsidy fraud and corruption, sometimes also about money laundering. At the end of 2022, the EU public prosecutors were investigating 1,117 cases with an alleged total damage of 14.1 billion euros. About half of all investigations are related to the ongoing problem of VAT fraud.
The EU investigators began their most spectacular action to date at the end of November 2022. It was called “Admiral”, took place in 14 countries, uncovered a suspected fraud network with 9,000 companies and 600 suspects who caused tax damage of 2.2 billion euros should. “Without the EPPO, the preparation of such an operation would have taken years,” said agency head Laura Kövesi on the day of the raids, “or more likely, it would never have taken place.” It won’t be long before Kövesi triggers the next hurricane.