Belgium authorities press charges over suspected €3m carbon credit fraud

The attempted European crackdown on so-called "carousel frauds" involving EU emissions allowances (EUAs) stepped up a notch yesterday when Belgium authorities charged three Britons and a Dutchman with VAT offences.

Prosecutors allege that the three Britons, who were arrested in Belgium last month, set up a firm in Tournai, in west Belgium, which then bought emissions allowances in the UK before selling them on through intermediaries. Authorities claim the group then pocketed the 21 per cent VAT leveled in Belgium on the sale of carbon credits, costing the Belgian Treasury €3m in lost revenue.

The three British suspects deny the charges.

The case is the latest in a series of arrests across Europe as authorities seek to crack down on carbon credit fraud, which according to recent figures from Europol has cost EU treasuries up to €5bn in the past 18 months.

Last month, French authorities arrested four people suspected of involvement in a €156m carbon carousel fraud, while in August seven people were arrested in London over alleged involvement in seven people in London in a suspected £38m carbon market VAT fraud.

Experts believe so-called "carousel fraud", whereby fraudsters sell carbon credits and collect the accompanying VAT, but then disappear before the money is handed over to the tax man, has become widespread and a number of governments have introduced new rules to tackle the problem by levelling VAT on the purchaser of carbon credits.

The EU is also currently debating whether to extend this so-called "reverse charge" mechanism across the entire bloc in an attempt to harmonise VAT rules and make carousel frauds involving EUAs impossible.