05 March 2004
The amount of money lost to the public purse through VAT fraud and error increased by more than £1bn over the past year, according to official estimates.
A National Audit Office report published on March 3 confirmed that £11.9bn was lost to VAT fraud and error in 2002/03 – up from £10.6bn in 2001/02.
But the auditors also noted that Customs & Excise was making significant progress in reducing fraud levels, with more targeted strategies beginning to yield results, especially with regard to missing trader fraud.
The amount lost to this type of fraud – whereby traders vanish without paying the VAT they owe – had been reduced from between £1.77bn and £2.75bn in 2001/02 to between £1.65bn and £2.64bn in 2002/03, the report stated.
Close working with the Department for Work and Pensions and the Inland Revenue, coupled with a one-off scheme to encourage traders to come out of the shadow economy, was also successful in helping Customs to identify almost 8,000 unregistered traders and release additional revenue of £91m.
NAO head Sir John Bourn acknowledged that Customs was working hard to reduce VAT fraud and error but added that 'success will ultimately turn upon whether they can secure a sustained reduction in the level of losses'.
This view was echoed by Public Accounts Committee chair Edward Leigh.
'What the honest taxpayer wants to see is significant progress being made in the war against the tax thieves. Customs must now ensure that their increased efforts against VAT fraud meet with tangible and lasting success,' he said.