The fraudulent avoidance of United Kingdom customs duties - estimated at 1.87 billion Euros - by a tidal wave of Chinese imports of clothing and footwear may have caused economic harm to textile and knitwear businesses in the Scottish Borders and the rest of Scotland.
A set of disturbing results from investigations by the European Commission Anti-Fraud Office (OLAF) and by the European Court of Auditors has received scant attention from the mainstream press and media.
But the apparent lack of financial controls by the UK Government on shipments of textiles from China does not generate confidence over what might happen post-Brexit. Britain is already being asked to make good the missing duties and VAT to EU coffers.
The Commons European Scrutiny Committee has expressed concern over the contents of the European documentation, and has been less than satisfied by explanations tendered by Westminster politicians, including Treasury minister Liz Truss.
According to the Committee, the most important element of the Commission’s Report is its description of a two-year investigation into HM Revenue and Customs by OLAF. It concluded that HMRC had enabled importers of Chinese textiles and footwear to evade customs duties totalling €1.87 billion between 2013 and 2016.
In response to these findings, it asked HMRC to take “all necessary actions” to stop the fraud from reoccurring, and to take “all appropriate measures to recover the customs duties evaded to the extent possible”. Separately, the European Commission has asked the Government to compensate the EU for the loss of these customs duties.
After being told of the European allegations, the Commons Committee declared: " The Commission has publicly warned that the UK may face an infringement procedure before the European Court of Justice for its failure to apply EU customs law and compensate the EU for the customs duties that were allegedly evaded.
"In view of the background to the allegations against HMRC, the potential implications of this dispute for the UK’s public purse (including any compensatory payments into the EU budget for the missing customs duties), and setting it in the wider context of possible negotiations on a new UK-EU customs partnership , we are asking the Minister to clarify [a number of matters].
From the documentation made available by OLAF and the European Commission, it appears HMRC was warned repeatedly from 2014 onward about the weaknesses identified in the valuation of imports from China without the necessary measures being taken to address the problem. A spokesperson for OLAF said: “Despite repeated efforts deployed by OLAF, and in contrast to the actions taken by several other Member States to fight against these fraudsters, the fraud hub in the UK has continued to grow.”
In a letter to the committee Ms Truss claimed that, while not disputing (widespread) undervaluation fraud at UK ports, the Government "does not recognise OLAF’s estimate of total customs duties evaded but is unable to provide a different estimate until 'individual cases' have been pursued to their conclusions based on their own facts”. The Minister also argued that the dispute would not have an impact on any forthcoming negotiations with the EU on a post-Brexit customs partnership, as it related to “historic transactions”.
In response the committee stated: "We thank the Minister for her response to our questions on OLAF’s allegations. It still leaves questions unanswered about the scale of undervaluation fraud on imported goods at the UK border.
"We are also concerned that the European Commission by November 2017 was still of the view that widespread undervaluation fraud at UK ports had not been addressed. The Court of Auditors also found that HMRC’s approach to Chinese textiles imports had led to trade diversion, apparently to benefit from the opportunities to avoid duties when seeking customs clearance at UK ports."
And the committeeIn a blunt warning the committee continued: "As we have noted before, the dispute could give rise to a considerable payment from the UK public purse to the EU budget to compensate for the duty loss. In addition, after the UK leaves the EU Customs Union and ceases to make direct contributions to the EU budget, undervaluation of imports would present a direct loss to the Exchequer as customs duties collected by HMRC would be retained entirely by the Government. It is unclear to what extent undervaluation fraud at UK ports has been able to take root precisely because the fiscal losses accrue to the EU budget, and not the UK Exchequer."
The serious issues revealed by the investigations have now been referred to the influential Public Accounts Committee and to the Treasury Committee.
The sheer scale of the problem was highlighted in the special report from the European Court of Auditors.
It claimed: "The values declared on the basis of fake invoices were undervalued from 5 to 10 times with a significant impact on customs duties and taxes collected. From the period 2007-2016 on the five Member States selected by the Court. Member States which implemented thorough release controls on undervaluation of textiles and footwear from China saw an increase in the average declared import prices but experienced a decrease in the volume of imports.
"The increase in the volume of imports in the UK was 358 000 tonnes, while the overall decrease in the other four Member States was 264 000 tonnes. According to OLAF, “the UK should have made available an estimated amount of 1.9874 billion euro (gross), or 1.5736 billion euro (net), more than it did from 2013 to 2016.
No comments:
Post a Comment