VAT Fraud Mutation, Part 2: CITIBank as a Transition

Abstract

The first part of this paper considered traditional MTIC fraud (push MTIC) in CO2 permits. The fraud in that case (Dosanjh) was swiftly put down. The traditional design of the fraud did not mean it was “garden variety.”

Sweeping arrests in the early morning hours of August 19, 2009, followed by year-long imprisonment without bail for seven individuals suggest concern at the highest levels. The UK zero-rated CO2 permits on August 1, 2009 because of the Dosanjh case.

However, with Dosanjh out of commission who would step up and be the new supplier of CO2 permits if the “blue chip” companies that Dosanjh sold to were interested in continuing to purchase from fraudsters? Based on the size of its purchases from Dosanjh, CITIBank was the natural target for HMRC’s follow-up surveillance. The CITIBank case explores thee suppliers.

This part argues that the CITIBank is transitional. We are moving from Dosanhj’s push-type (or externally controlled) MTIC fraud, to a sustained pull-type (or economically controlled) MTIC fraud. The first of these mature pull-type frauds is considered in the final part of this paper, the Deutsche Bank case. The Deutsche Bank case cannot be fully understood without grasping what occurred in the CITIBank transition.

Keywords: VAT, MTIC fraud, CO2 permits, Dosanjh v HMRC, CITIBank v HMRC, Deutsche Bank, Pull-type MTIC, Push-type MTIC

JEL Classification: K14, K33, K39