20 Feb 2012

A €1.6 billion VAT scam in France

It would be difficult to find a more convincing demonstration of why the current tax system needs to be scrapped. This week's "Canard Enchainé" revealed a previously unknown scam by which 83 French companies were payed €1.6 billion in illegal VAT refunds in a single year - between the summer of 2008 and the summer of 2009.

The scam is based on the 2005 Kyoto agreement which allows companies to buy the carbon quotas of companies that pollute less. These "quotas" could be bought for about €20 a ton in 2009, via a organisation called "BlueNext". Here's how the scam works. The frauder "buys" carbon quotas from a foreign company, and then sells them on to a French company with VAT added. The French company pays the bill often via an account in an offshore tax-haven. At this point, the company selling its quota disappears without ever paying any VAT to the French Tax authorities. But that doesn't stop the French company claiming back the VAT that they "paid". Result - €1.6 billion of hand outs in a single year.

This sort of fraud would disappear if the current VAT system was replaced by a Financial Transaction Tax. Yet another good reason for a revolution.

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