Today, the Amsterdam court dealt with a large-scale VAT carousel fraud. It involved legitimate telecom companies that paid a total of 7.7 million euros in VAT for fictitious call minutes provided by Dutch companies that turned out to be part of a criminal organization aimed at filing incorrect tax returns and committing forgery. The Public Prosecution Service demanded prison sentences of up to 3 years against 5 individuals. These were the actual managing directors of Dutch companies and several others who facilitated this fraud in the Netherlands.
This criminal case is the result of various criminal investigations. A criminal organization in England and America developed a VAT carousel, which they rolled out as a kind of plug & play across various European countries (England, Germany, Spain, Italy, and the Netherlands). The prosecutor speaks of an innovative method of fraud: “In this carousel fraud, the organization does not directly request a tax refund from the Tax Authorities with someone in the chain, but it uses a legitimate party that brings new VAT money into the structure and requests this back from the Tax Authorities. The organization steals directly at the first step in the fraud chain,” instead of paying it back to the Tax Authorities in the last link of the fraud chain in the Netherlands. The VAT paid was ultimately siphoned off by the American financing company VoIP Guardian Partners LLC.
To stop this fraud, the Tax Authorities declared the so-called transfer regulation applicable to this service in mid-2017, meaning that parties can no longer charge each other VAT and therefore cannot request it as input tax from the Tax Authorities.
The Investigation
The investigation started in May 2017. It involved a complex form of fraud. A foreign financing company was used to buy up claims between parties. Payments were made via foreign payment platforms, causing the cash flows not to go through the Netherlands and no transfers occurred between regular bank accounts. There was also a concealment of the fraud through the use of so-called contra-carousels, making it appear as if payments and receipts canceled each other out.
The Dutch suspects who were part of the criminal organization had to account for themselves in court in March. The so-called front men were previously offered a Public Prosecution Service penalty order, and the investigation against VoIP Guardian Partners LLC, now bankrupt, was settled with a transaction of 7.7 million euros.
Severity of the Facts and Sentencing Demand
The Public Prosecution Service considers the facts serious due to the significant social damage, the organized nature, and the lack of ethical awareness. According to the prosecutor, the defendants present at the hearing, except for one suspect, clearly acted with intent. The Public Prosecution Service holds this against the defendants heavily. The prosecutor therefore considers prison sentences of up to 3 years appropriate here.
Next week, the pleas of the lawyers will follow.