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EU smells fraud on ‘Belt and Road’

EU smells fraud on ‘Belt and Road’
Reuters Apr 22, 2018

EU and Italian authorities are investigating suspected wide-scale tax fraud by Chinese criminal gangs importing goods via Greece’s largest port of Piraeus, a trade gateway between China and Europe, officials said.

“The VAT [value-added tax] is completely evaded, with enormous damage to the national tax authorities and to the community,” Fabio Botto, of the Italian Central Means of Payment Antifraud Office’s special investigative unit, said in an interview.

The suspected scam at Piraeus, part of China’s vast “One Belt, One Road” initiative, had cost Italy tens of millions of euros in unpaid VAT, although the total could be far higher as the investigation was not over, he said.

The European Anti-Fraud Office (OLAF) confirmed it was working with Italy on the investigation, but declined to give details, citing confidentiality.

Botto said his agency had evidence that Chinese-owned firms run by the criminal groups were fraudulently avoiding import duties and VAT on large shipments of goods through Piraeus.

The groups import goods, often counterfeit clothing and footwear, and massively understate their value to EU customs to avoid import duties, he said, adding that they also lie about the firms that receive the goods, enabling them to avoid VAT.

Greece’s Financial Crime Unit is conducting a separate investigation into a suspected tax fraud case involving Chinese goods imported via Pireaus.

The Greek unit has had little contact with Italian and EU authorities and has not been informed about the wider investigation, an official there said.

China’s state-owned Cosco Shipping Holdings Ltd (中遠海運控股) owns a majority stake in the Piraeus Port Authority, which manages one container terminal, while a wholly owned Cosco subsidiary owns and manages two other terminals.

China wants to transform the port into its “gateway to Europe” under the initiative, which envisions a new “silk road” of land and sea routes with trading partners.

Botto and the Greek official said that neither investigation had evidence of any wrongdoing by Piraeus port authorities.

“The company has in its global operations consistently and strictly followed local and international laws and persevered to operate legally and compliantly,” Cosco said.

The port authority said it had not received any information about criminal groups using the port and added that it would alert authorities if it did.

It said it took all necessary measures to ensure that goods had customs supervision, it said.

“[The port authority] is under no circumstances responsible for conducting checks for illegal activities,” it said in a statement.

OLAF and national authorities have in recent years clamped down on customs loopholes used by Chinese smugglers, whose tax scams they estimate cost the EU billions of euros per year.