VAT Fraud Out Of Control

VAT "Carousel" fraud is ballooning out of control (see here for BOM primer). A few weeks ago we learned that the Office for National Statistics put fraudulent trade at £7bn in the first quarter of this year. Now they say it increased to £10bn in Q2, or £40 bn pa. That's absolutely massive- 3% of GDP. And as the Bank of England says, that size of fraud "makes it extremely difficult to ensure accurate measurement" of what's actually happening in the economy.

But what taxpayers need to know is how much are we losing? With £40bn of fraudulent trade, the baseline estimate is 17.5%, equals £7bn. Which is a huge increase on HMRC's historic loss estimates (see NAO Report here):

But £7bn is just the start. HMRC can lose money at various points in the Carousel chain. As the Guardian points out, that 2004-05 loss of up to £1.9bn was against the ONS estimate of fraudulent trade for that year of only £2.4bn. So scaling pro rata up gives us a new estimate for this year of around £30bn.

A £30bn loss is not some marginal irritation: it is a major crisis for Britain's fiscal probity.

And now there's talk of taxes being increased to compensate.

Following yesterday's revelations that the tidal wave of Eastern European immigration is undermining Council finances, VAT fraud is yet another example of this incompetent government losing control of its supposedly core functions.

And it's costing us a fortune.