LONDON — Brexit negotiations will get even more complicated for the government, with the EU set to demand €2 billion (£1.7 billion) from the UK as part of a fraud investigation.
The EU believes that British customs officials have failed to stop Chinese crime gangs from systematically undervaluing goods imported to the EU via Dover and Folkstone.
The gangs give the minimum price per kilo for things like clothes that pass through the ports, allowing them to avoid paying full VAT and excise on the goods.
The organised crime ring was uncovered by the EU’s anti-fraud office OLAF and is one of the biggest ever discovered in the EU. The tax dodge has to date deprived the EU of an estimated €2 billion in excise taxes alone.
Politico first reported that the EU would seek €2 billion from Britain in early March and the Times on Tuesday ran a similar story, citing “senior Brussels sources.” The Times quotes an unnamed European Commission diplomat as saying: “This fraud is still going on and Britain knows. It will come up in trade discussions and it will have an impact on the future customs relationship between the EU and Britain.”
European officials are frustrated with Britain for failing to tackle the fraud problem, which has escalated in recent years. The Times reports that OLAF has held four meetings in the last two years with senior British officials to discuss the problem, but to little effect.
A spokesperson for OLAF told Politico in March: “Despite repeated efforts deployed by OLAF, and in contrast to the actions taken by several other member states to fight against these fraudsters, the fraud hub in the UK has continued to grow.”
The demand for €2 billion to recoup some of the revenue lost to fraud will come on top of the €60 billion (£50.9 billion) divorce bill that the EU will ask of Britain as part of Brexit talks. The €60 billion figure is meant to cover previously promised budget contributions, pension payments, and other costs associated with Britain’s membership.