In addition to the arrests, carried out in Rome at the request of the European Public Prosecutor’s Office (EPPO), Italy’s financial authorities executed a freezing order that targeted the suspects’ bank accounts, properties, and other assets.
In cases of VAT fraud, goods are traded in domestic markets, while the conspirators fraudulently claim to local tax officials that the goods were instead exported to other EU markets, thereby shielding the conspirators from having to pay the otherwise mandatory VAT.
By circling what should have been local tax payments back into the conspirators’ own pockets in Italy, such cases of fraud have also come to be known as carousel fraud.
The focus of the investigation is a beverage trading company headquartered in Foggia. Investigators said that the conspirators issued fake invoices for non-existent goods and produced paperwork for fictitious transactions involving Italian and Bulgarian companies.
In such cases of VAT fraud, such companies are known as ‘missing-traders,’ in that they are shell companies created for the sole purpose of circumventing VAT payments.
“The beverages appeared to pass through Bulgaria, but in fact were distributed directly in Italy without ever passing through Bulgaria. This allowed them to sell products at artificially low prices, undercutting legitimate competitors and resulting in VAT losses amounting to €18 million.” EPPO said in its report.
Listed amongst the implicated Italian companies are distributors that declare millions of euros in invoices every year. EPPO could not immediately comment on the names of the distributors.
All seven individuals, whom the Foggia judge has ordered to remain in preliminary detention or house arrest until the investigation is complete, face money laundering charges in addition to fraud, which in Italy can levy a hefty fine and an eight-year prison sentence.
