One EU Carbon trading scam comes to trial: €5 billion just in lost taxes

The amounts of money sloshing around in the EU in carbon trading scams is mind-boggling and puts even drug money into the shade. The EU emissions trading scheme has been one of the major drivers of corruption in the last few years. The latest scam to come to trial is in Germany where just the tax evasion amounts to €5 billion ($7 billion). The total value of the carbon trades involved in this particular fraud probably exceed €50 billion. The frauds revealed so far are just a tiny fraction of all the succesful frauds that have been perpetrated – and all with the undoubted help (and connivance) of EU politicians.

It would not be surprising if the total cost of the EU emissions trading schemes (assuming  a conservative 80:20 principle) exceeded €250 billion. Eventually, the cost of all these carbon trades will have to be borne by EU taxpayers and electricity consumers.

Reuters reports:

A 5 billion euro tax fraud returned to haunt European Union’s emissions trading scheme on Monday as six individuals faced tax evasion charges at a trial which starts in Frankfurt. The case will haul the market’s multiple scandals back into the spotlight but is unlikely to implicate investment banks following a similar case against small firms in Britain.

In an activity which peaked in May 2009, traders bought carbon emissions permits in one country and sold them in another, charging for and then keeping the value-added tax (VAT) which they should have handed to tax authorities.

  • The total value of the fraud was at least 5 billion euros ($7.1 bln) in lost tax receipts, according to Europol
  • Charges have been brought against individuals at small firms. Europol said the fraud was linked to criminal networks operating outside the EU including the Middle East
  • The biggest swoop, initiated by Germany in early 2010, saw more than 2,500 officers involved across European and other countries
  • In Germany, prosecutors said in March that in addition to the six individuals charged, a further 170 suspects including seven Deutsche Bank employees were still under investigation and could be charged later
  • In Britain, the first trial of seven suspects risked delay as the investigation unearthed new evidence
  • It was easier to open an account on the carbon market registry than to open a bank account, allowing less reputable characters to participate.
  • As a new market, tax authorities in EU member states were slower to spot the fraud opportunity
  • The fraud was carried out on an unregulated spot market. Participants in such markets do not have to register with financial authorities, unlike in futures markets
  • As well as making it easier for fraudsters to gain entry, unregulated markets do not force strict know-your-client (KYC) rules on law-abiding participants meaning criminals escaped detection more easily
  • Officials at Paris-based Bluenext have not denied that their spot exchange was used by tax evaders but have maintained that they acted to stop the practice
  • French tax authorities are demanding 355 million euros ($505 million) from Bluenext, owned by NYSE Euronext, in unpaid VAT related to trades that occurred on the exchange
  • The EU’s head of tax, Algirdas Semeta, and of climate change, Connie Hedegaard, in June sent letters to EU states urging them to apply reverse tax charges which would remove the opportunity to buy EUAs VAT-free and then pocket the tax
  • The carbon market has suffered scandals besides VAT fraud, including a phishing attack, the circulation of used emissions permits and cyber theft of EUAs
  • The market has seen near-record low prices in recent weeks as the threat of a new downturn widens a glut in permits

Tags: , , , , ,

%d bloggers like this: