EP: Fighting customs fraud and protecting EU own resources

On 13 January 2020, the Offical Journal of the EU published a European Parliament (EP) resolution of 4 October 2018 on fighting customs fraud and protecting EU own resources (2018/2747(RSP)).

In it,the EP recalled that fighting customs fraud is important because customs duties on imports from outside the EU and sugar levies account for around 12,8 % of EU own resources (aka - the money the EU generates itself).

Customs duty fraud is occurring in the EU. In one specific case concerning textiles and shoes imported from China through the UK in the period 2013-2016, the EU's Anti-Fraud Office, OLAF, calculated a loss for EU budget own resources of EUR 1.987 billion in terms of lost customs duties.

Customs Undervaluation

A tyical way of customs fraud involves undervaluation, whereby importers can derive profit from evading customs duties and related taxes, paying much less than what is legally due. In the specific UK case, this also resulted in in VAT evasion in connection with imports through the UK through abuse of the suspension of the payment of VAT, the so-called customs procedure 42; whereas these losses are cumulatively estimated to be in the range of EUR 3,2 billion for the period 2013-2016, which also represents a loss for the EU budget;

Criminal proceedings

Back in 2017, OLAF recommended judicial proceedings against those involved in fraudulently evading customs duties and against those knowingly involved in laundering the proceeds of this offence;

The case in Greece

In 2019, OLAF was also investigating a new customs undervaluation case involving the port of Piraeus in Greece, which represents a serious loss for EU resources and is estimated to have cost Italy tens of millions of euros in unpaid VAT, though the total could be far higher as the investigation is still ongoing;

No harmonised customs control

The resolution states there is no harmonised and standardised application of customs controls by Member States and that this may incentivise fraudsters to choose the weakest link in the chain to perform their fraudulent imports

EP asks EU to take action

The EP has asked the EU Commission to take all necessary measures to recover uncollected EU own resources to provide revenue for the EU budget and to take action in order to prevent future abuse of customs procedure 42. The EP also asked the EU Commission to ensure that Member States fully comply with the provisions of the Union Customs Code and "to clarify any provisions that may lead to confusion". Finally the EP has called on the Commission and the Member States to make sure that the application of the common rules by customs authorities is organised in such a manner that fraud, including carousel fraud, is effectively prevented and controls are reinforced at ports, airports and land borders and on the internet;

Towards an EU legal framework for customs infringements and sanctions

The EP has asked that a Union legal framework for customs infringements and sanctions is agreed, in order to allow harmonised administrative sanctions and the application of the same criteria in consideration of violations;

Implementing a definitive VAT system

The EU should also implement a definitive VAT system, which aims to harmonise the way VAT is collected and paid across the EU in order, among other things, to avoid fraud;

Responsibilities to EU level for harmonised treatment

The EP would favour transferring the responsibilities of customs authorities from national to EU level as regards ensuring harmonised treatment at all EU points of entry, monitoring the performance and activities of customs administrations, and collecting and processing customs data.

Read the entire resolution

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