Thunder! Freight forwarding gang suspected of tax evasion of over 300 million euros was arrested

Recently, the news that the European Public Prosecutor's Office raided Liege Airport and arrested a freight forwarder suspected of tax evasion of 303 million euros has caused a stir in the logistics industry. Many freight forwarders have announced that they will suspend accepting goods, and industry insiders have even revealed that goods in multiple regions have been seized. At the same time, the inspection rate in the United States has also increased, and the logistics industry seems to be facing a new earthquake.

Europe arrests freight forwarding gang that evaded 303 million euros in taxes

The European Public Prosecutor's Office has been conducting a large-scale investigation into Chinese exporters suspected of VAT fraud. On Tuesday morning local time in Belgium, the European Public Prosecutor's Office ( EPPO) launched a surprise inspection operation against Chinese exporters' VAT fraud cases, conducting 10 searches at Liege Airport and several logistics warehouses in Zeebrugge.

During the search, four suspects were arrested, including two managers, an accountant and an employee. Investigators seized four cars (including Audi and BMW), more than a dozen bank accounts and corresponding computer equipment from the four people's homes. It is estimated that the amount of tax evasion in this case is 303 million euros (about 2.26 billion yuan).

In this fraudulent activity, some Chinese companies are suspected of using the relevant exemption clauses in the EU CP42 rules to commit fraud. It is reported that in order to simplify trade procedures, the EU stipulates that goods entering through Liege Airport can enjoy the VAT import exemption of the EU CP42 if their destination is other EU member states.

In order to benefit from this tax exemption, Chinese exporters worked with private customs agencies /VAT representatives in Belgium to declare the final destination of the goods as an EU member state.

In the process, they used front companies in France, Germany and other places, used false invoices and forged shipping documents to create the illusion that the final destination of the goods was in other EU member states, and used false business chains to divert the attention of inspectors. However, the shell companies did not receive the goods, and these goods were eventually used to supply physical companies established in other member states and sold to overseas consumers at full price.

Throughout the entire process, the value-added tax paid by consumers when purchasing products was not declared according to law, and at the same time, high taxes were avoided, thereby making huge profits.

According to survey data, between 2019 and 2022, the persons involved caused approximately 303 million euros in tax evasion losses and 6.6 million euros in customs duties losses, involving a variety of crimes including forged customs documents, VAT fraud, illegal money laundering and involvement in crimes.

As the "most profitable" criminal activity in the EU, VAT fraud and other behaviors have always been the focus of the relevant EU agencies. According to incomplete statistics, in 2022, EPPO conducted 1,117 investigations, of which 16.5% were related to VAT fraud. The losses caused by such tax fraud accounted for about 47% of the total loss of EU public revenue (14.1 billion euros).

After the incident went viral in the cross-border circle, many sellers and freight forwarders in the European market became worried: if freight forwarders evade taxes and customs settle accounts together, the logistics industry may face a major earthquake.

Many freight forwarding companies stopped accepting goods, and the logistics industry may face a major earthquake

"Due to the surprise inspection at Liege Airport, our European air transport channel has been suspended," a freight forwarder issued an emergency notice. In addition, the freight forwarder said it would make every effort to coordinate the goods that were already in transit and in the warehouse. In the circle of friends, there are many freight forwarders who issued the same emergency notice.

After further investigation, the goods involved will certainly be detained, and the freight forwarders will have to bear the relevant responsibilities and losses. It is possible that some freight forwarders will be overwhelmed and eventually go bankrupt. This will further intensify the internal competition in the logistics industry and squeeze the survival environment of small and medium-sized freight forwarders.

At the same time, some freight forwarders also reported that goods in other regions were seized. Some freight forwarders reported that goods in the Czech Republic, a fortress on the Central European land route, were also seized and the current fine has reached 300 million euros; Qatar Airways seized dozens of containers; Belgium also detained multiple batches of goods, so sellers need to be extremely cautious when shipping goods.

Some industry insiders are worried that as the investigation of the case deepens, the number of freight forwarders affected will only increase. This incident is likely to affect customs clearance in Belgium and even the entire EU. They will increase the inspection rate and increase the intensity of spot checks, especially for some low-declaration inspections, and Chinese goods will be the focus of their inspections.

In fact, since the beginning of this year, various customs inspection news has come one after another, and the customs inspection rate in the European market has shown a clear upward trend compared with the previous one. Some freight forwarders have reported that the European inspection rate has risen to between 10% and 15%, and the average waiting time for inspection is 2-3 weeks. The increase in the inspection rate means that the risk of tax declaration and customs clearance is higher, and it is very likely that the cost will increase.

It is understood that the customs of European countries mainly check the cargo declaration information, relevant documents, relevant qualifications and whether the products meet the EU access conditions. Among them, the inspection of products with relatively high taxes such as lamps, textiles and toys is the most intensive. In order to reduce tariffs /VAT, some sellers or service providers will choose to take risks and declare low, but this will also cause trouble.

Compared with other regions, the compliance issues in the European market are relatively large, and there are often delays due to inspections or various issues, so some sellers have reduced their business in the European market. The search at Liege Airport is not accidental. EPPO has been conducting searches on customs clearance, and last year's 2.2 billion euro international tax fraud case is the best example.

This VAT fraud case was the trigger for the EU to increase customs clearance efforts. Some freight forwarders bluntly stated that the world of self-taxation is coming, and it is still necessary to declare truthfully to avoid the goods being detained and seized.

At the same time, the inspection rate in the United States has also increased significantly. The U.S. Customs and Border Protection has also added 7 inspection sites, bringing the national inspection rate to 15%. Based on the recent inspection data of several U.S. customs, the inspection rate in Los Angeles has increased by 30%; the inspection rate in Oakland has increased by 30%, and the waiting time is an average of 2-3 weeks; the inspection rate in Miami has increased by 10%, and there are more infringement issues.

"Canada may have large-scale inspections like the one in 2021," a freight forwarder said. It is reported that a large number of goods were delayed due to customs inspections by Canadian customs that year, ranging from one to two months to half a year. A large number of sellers could only choose to return the goods or transship from the United States to reduce the impact of logistics delays.

The editor hereby reminds all sellers that they must prepare accurately when declaring, and must not take shortcuts by means of low prices, otherwise it will only backfire.

logistics

tax evasion

Europe