Treasury is losing £1bn a year from petrol fraud

21 Feb 02

Fraud on petrol and diesel taxes may have cost the Treasury almost £1bn in revenue in 2000, according to the National Audit Office.

22 February 2002

Research published by the public spending watchdog has shown that up to £980m may have gone missing through smuggling and the misuse of rebated fuels, such as the red diesel sold to farmers at a discounted rate.

NAO inspectors concluded that the problem was particularly acute in Northern Ireland and estimated that as much as £380m could have been lost in the province. The problem was exacerbated by people legitimately crossing the border into the Irish Republic to take advantage of cheaper prices.

Customs officers believe that up to 450 Northern Irish filling stations sell illicit fuel, of which about 250 sell only smuggled petrol and diesel. Much of this is supplied by criminal gangs, which are expert in disguising rebated fuels by neutralising the dyes in them that show they qualify for lower tax rates.

But Customs and Excise is on the case. In 1999, it introduced a strategy for tackling the fraud, and has since seized twice the amount of illicit fuel. NAO chief Sir John Bourn recognised the progress the department had started to make, but said more needed to be done.

'Growing sums of revenue are being lost through smuggling and the illegal use of rebated fuel,' he said. 'Every effort must be made to combat this criminal activity.'

The Inland Revenue is 'unlikely' to meet its target of offering 50% of its services electronically by December 2002, the NAO has said. 'Teething problems' with the software for on-line self-assessment tax returns has discouraged the take-up of e-services, and has heightened concerns about the security of Internet transactions, the office's inspectors found.

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