Britain may have to pay a €2bn bill from Brussels for failure to crack down on customs fraud by Chinese clothing importers.
Olaf, the EU’s anti-fraud office, said yesterday that Chinese importers had escaped customs duty by declaring textiles and clothes to be worth a tiny fraction of their true value.
The authority said much of the activity was organised by international criminal gangs and accused the UK of failing to act on repeated warnings.
Evidence cited by the agency included imports of women’s trousers valued at €0.91 per kg, less than 5 per cent of the average customs valuation for such products across the EU.
The results of the three-year probe have been handed to the European Commission to decide whether to pursue the UK for lost customs duties, one of the main sources of revenue for the EU budget.
Any move to do so would set up a bruising battle with London, which already faces highly sensitive talks with Brussels on the cost of its Brexit divorce.
Olaf, the Office de Lutte Anti-Fraude, said its investigation into the “undervaluation fraud”, first reported by Politico Europe, revealed the problem centred on the UK. The authority said last year some four-fifths of lost customs duties were down to fraud at the UK border.
“In contrast to the actions taken by several other member states to fight these fraudsters, the fraud hub in the UK has continued to grow,” it said. Olaf has made a formal recommendation to the commission to use its powers under EU law to recover almost €2bn in lost duties over the 2013-16 period.
The British government contested Olaf’s figures and criticisms of its record in fighting customs fraud. The office’s estimate is “not one that is recognised by our experts who will be challenging . . . their calculations”, said HM Revenue & Customs, the tax agency.
“HMRC has a very strong record for tackling fraud and rule-breaking of all kinds, securing more than £26.6bn last year alone and no one should be in any doubt that we are responding to the threat of fraud,” it said, adding that it is handling more than 550 cases relating to “potential import fraud”.
The EU funds itself through a mix of contributions paid by national exchequers, a share of value added tax receipts and through “traditional own resources”, which include sugar levies as well as customs duties.
“These losses to the EU budget are still ongoing as this fraud has not been stopped to date,” Olaf said.
In addition to lost customs duties, the watchdog believes the undervaluation fraud will have had a knock-on effect on VAT receipts in a number of countries. Olaf estimates that as much as €3.2bn in tax revenue was lost in the period 2013-16, although this is not addressed in its recommendation to the commission to recoup money from the UK.
“Olaf has repeatedly drawn the attention of the UK customs authorities over the last years to the scale of the phenomenon and to the ongoing revenue losses,” it said. The European Commission declined to comment.
