Transit swindles cost EU billions

Date: 09/11/1995

By Rory Watson

TRANSIT fraud has cost the European Union up to 8 billion ecu since the single market entered into force, prompting calls for a major investigation into the problem and how to combat it.

The losses have resulted in part from organised crime, with the contents of thousands of lorries and containers sold illegally in cities, towns and villages throughout the 15 member countries.

All-party pressure is now growing within the European Parliament for MEPs to use new Maastricht powers to establish their first temporary committee of inquiry, with the ability to call national and European witnesses, to investigate the transit system and to devise ways of closing the loopholes.

The growth in transit crime as goods - particularly cigarettes - disappear inside the Union instead of reaching their stated destination in a third country, affects every EU government.

According to Labour MEP John Tomlinson, who has led the fight against EU fraud, 75&percent; of the loss of revenue in uncollected excise and customs duties affects national exchequers and 25&percent; is lost from EU funds.

The European Confederation of Tobacco Retailers (CEDT) estimates that one in five cigarettes smoked in Spain and Italy are contraband.

The figure for Germany is put at 15&percent; and elsewhere at between 5 and 10&percent;. The Spanish government alone lost 625 million ecus of potential revenue from tobacco excise last year.

The problem is most serious in the tobacco sector, because cigarettes are relatively easy to steal and sell. But it also affects alcohol, textiles, frozen meat and bananas.

The Court of Auditors has devoted a special section of its 1994 annual report, to be released next week, to transit fraud. The European Commission's anti-fraud squad, UCLAF, is constructing a profile of the many levels of tobacco transit fraud, establishing links between the trade and other criminal activities.

The problems stem largely from the failure of the transit system, designed 30 years ago, to cater for the huge growth in demand. Introduced for the first six EU members, it now covers 15 and will be extended next year to the four Visegrad countries: Poland, Hungary, Slovakia and the Czech republic.

The tactics used by organised crime to make freight 'disappear' include forged customs stamps, false declarations of goods, stolen merchandise and misuse of names of legal and respectable companies. Polish and Czech forwarding companies are now accused of establishing limited companies in Germany with a DM 20,000 guarantee. They allegedly issue thousands of transit documents and when presented with a tax bill go bankrupt, only to set up a new company.

The scope for fraud is evident given that 18 million transit documents are issued annually and that 432 billion ecu of taxes and duties are channelled through the system annually. The fraud affects not just national authorities and the EU's budget, but also manufacturers, legitimate traders and freight companies. In the Netherlands alone, freight forwarders have received tax bills of nearly 900 million ecu for missing goods.

The European Parliament's political group leaders will have to decide in the coming weeks on the specific brief for the first committee of inquiry. Many MEPs are openly impatient that even two years after they were given this new power, which they believe can be employed to improve the Union's image, it has not been used.

With approval of the ad hoc committees' rules of procedure agreed by MEPs last month, there is now little excuse for delay. After its recent setback against France, there is now little momentum in the European Parliament behind an earlier suggestion to select nuclear tests as the first subject.

Tomlinson, whose call for the inquiry to focus on fraud has won support from other MEPs, said: “Of all the issues I feel this would be the most appropriate for the first committee of inquiry to deal with. People are queuing up to give evidence and it would show the Union in a good light.”