Polish tax authorities have disclosed that a recently busted VAT fraud gang is believed to be the biggest in the country’s history, reports Rzeczpospolita.
The illegal operation ran for eight years, selling fictitious invoices for an estimated total value exceeding one billion zloty (€223 million), according to an investigation by the Regional Prosecutor’s Office in Warsaw and the National Tax Administration (KAS).
The company, founded in 2013, sold the fake invoices to other firms to inflate their costs and thus pay lower tax on earnings. The fictitious services would be matched to the line of the business of the companies – which included transport, construction and IT – to avoid raising suspicion.
The fake invoices would be issued by shell companies, whose management boards included unemployed and homeless people. Customers would usually pay between 8% and 10% of the sum on the invoice, reports Rzeczpospolita.
The two men who ran the business have been detained on charges of leading a criminal gang. In total, 35 people have been charged with participating in an organised crime group and seven are suspected of VAT crime. Four of them, including the two who led the operation, are in detention.
However, officials believe that as many as 1,500 people could have been involved in the case, either as customers or by running the group. “Some names will be surprising,” an anonymous source told Rzeczpospolita, suggesting that there were well-known businesses on the list.
The investigation has reportedly found evidence of over 100 companies using the illegal workaround. Fiscal authorities have thus blocked a number of invoices and managed to claw back 10 million zloty (€2.2 million) in unpaid VAT. The regional tax office in Mazovia Province has launched 73 inspections.
Poland’s Law and Justice (PiS) government has cited cracking down on VAT avoidance as one of its priorities since coming to power in 2015. According to an EU report published last year, Poland has achieved the third largest decline in its VAT gap among all member states in 2018.
In 2017 the government raised the status of tax fraud to the highest crime, carrying up to 25 years in jail for defrauding more than 10 million zloty, and 15 years for sums above 5 million zloty.
Andrzej Sadowski, who heads the Adam Smith Centre think tank in Warsaw, said that an estimated €500 billion is embezzled in VAT fraud across the EU each year.
Main image credit: Gosia K./Pixabay
Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.
