The Canadian tax authorities have revealed they are collaborating with the UK on an ongoing international investigation into an alleged so-called ‘carousel’ tax fraud scheme which put over $50m (£30m) of tax at risk
The Canada Revenue Agency (CRA) says that this week saw over 80 of its tax investigators and HMRC execute search warrants at three locations in Canada and six locations in the UK.
The CRA launched the investigation when it uncovered that, over a five year period, 11 foreign nationals based in the UK allegedly orchestrated a tax fraud and money laundering scheme by attempting to obtain $52 million in false refunds for and rebates for goods and services taxes (GST) and or harmonized sales taxes (HST).
The Canadian tax authorities say the fraud involves an organised scheme where a business buys and sells goods or services, and charges the GST/HST from one company to another. The GST/HST input tax credit for taxes charged are claimed from the CRA for a refund; however the businesses throughout the chain that sell the goods or services and allegedly charge and collect the tax never remit the GST/HST funds to the government. The process can repeat many times resulting in the goods moving around in the same fashion as a ‘carousel’.
This type of fraud is unusual in Canada, although there have been some significant instances in the UK. The CRA’s statement suggests close collaboration between the two countries, referring to ‘using intelligence gathered through a variety of tools at its disposal, as well as through information sharing and collaboration with domestic and international partners.’
HMRC has confirmed that six addresses in the West Midlands and South East have been searched as part of the investigation led by the CRA.
Forty officers from HMRC searched the addresses in London, Redditch, Birmingham, Stratford Upon Avon and Kenley areas yesterday (13 June) with simultaneous searches in Ontario, Canada. Documents, computers and mobile phones were seized as part of the operation.
Paul Fisher, Assistant Director, Fraud Investigation Service, HMRC said: ‘Tax fraud is a threat to public funding across the globe. As this operation shows, HMRC regularly work with our international partners to both tackle, and assist others in tackling, suspected tax fraud.’