Britain says breaks international VAT fraud scam

LONDON, Aug 15 (Reuters) Britain today said it had smashed a multi-million pound international VAT fraud after 22 people were arrested in raids across the country.

The detentions were linked to a suspected ''carousel'' fraud whereby a fraudster charges VAT on sold goods which is not then handed over to the government. An added twist is that the unpaid tax is reclaimed from the government at a later stage.

The fraud involves the same goods being traded around contrived supply chains within and outside the EU and where VAT of 17.5 per cent is reclaimed by the final trader in the chain when the goods are exported.

''Organised criminals are attacking the tax system, with the aim of stealing huge amounts of revenue,'' said Gordon Miller, a deputy director at Her Majesty's Revenue and Customs (HMRC).

''Today's operation, the biggest ever undertaken by HMRC, is part of a large scale, international criminal investigation into frauds that may run into hundreds of millions of pounds,'' Miller said in a statement.

HMRC said Missing Trader Intra-Community Fraud and its more sophisticated application, carousel fraud, cost the British taxpayer between 1.1 billion pounds and 1.9 billion pounds in 2004-2005.

Goods used for the fraud are often mobile phones and computer chips.

REUTERS KD RAI1821