VAT fraud 'four times bigger than official figures'

VAT fraud is costing the British taxpayer four times official estimates, according to the BBC.

The BBC's Panorama programme says it has obtained information that shows VAT fraud was £8.4bn between June 2005 and June 2006.

This is five times more than the amount lost to VAT fraudsters by any other European Union country, the programme's makers say.

They said the Treasury disputes the new figures, adding that government figures put losses to VAT fraud as up to £1.9bn in 2004-5.

The fraud involves the repeated importing and exporting of goods with VAT being reclaimed each time.

The new research was carried out by a Belgian-based anti-fraud group, the BBC said.

John McFall, Labour chairman of the Treasury Select Committee, said a "reverse charge" scheme should be introduced to combat the fraud.

This would make VAT on items like mobile phones and computer chips payable only when they are sold to a final user, such as a retailer.

"If it was implemented it would remove the mechanism for stealing VAT from about 95% of the goods traded in carousel frauds," Mr McFall told the BBC Radio 4 Today programme.

"The Government, I believe, have got space in the Finance Bill to include that reverse charge."

Shadow Paymaster General Mark Francois said: "The Treasury published a report about this, detailing the problem as far back as 2001. Here we are in 2006 and all the serious commentators agree that the problem is getting worse and worse.

"So why has Gordon Brown been asleep at the bridge for five years whilst taxpayers' money is being stolen on a massive scale?"