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August 22, 2026

Newsletter

The European Post

Policy • Diplomacy • Strategic Insight

LATEST
What the EU Taiwan Framework Would Actually Have to DoKorea Signed a Digital Trade Deal That Nobody Has RatifiedCritical Minerals in Mongolia Still Have to Cross Two BordersCan an Indonesia Trade Deal Survive Two Years of RatifyingCross-Border Data Orders Went Live Before the Plumbing DidPlatform Work Rules Take Effect in December and Few Are ReadyCan Europe’s Firefighting Fleet Keep Pace With EU WildfiresThe AI Act Deadline Passed on 2 August and Nothing BitWhy Construction Keeps Shrinking While Confidence ImprovesAccession Talks Stall Again and September 1 Is the TestBrussels Applied a Trade Deal It Cannot Yet RatifyAfrica’s Power Market Now Needs Money More Than BlueprintsLong-Term Budget Talks Enter Autumn Without a Council LineForeign Subsidies Enforcement Now Turns on a Dublin RaidWho Writes Europe’s Telecom Rules Once Copper DisappearsDisability Cards Exist on Paper and Nowhere Else Until 2028Losing Visa-Free Travel Now Takes a Thirty Percent SwingTwenty Flagship Actions Will Test Whether the Culture Compass WorksEurope’s Quality Jobs Act Now Rests on What Unions Do by SeptemberDoes a Three Euro Parcel Duty Change Anything About Cheap ImportsWhat the EU Taiwan Framework Would Actually Have to DoKorea Signed a Digital Trade Deal That Nobody Has RatifiedCritical Minerals in Mongolia Still Have to Cross Two BordersCan an Indonesia Trade Deal Survive Two Years of RatifyingCross-Border Data Orders Went Live Before the Plumbing DidPlatform Work Rules Take Effect in December and Few Are ReadyCan Europe’s Firefighting Fleet Keep Pace With EU WildfiresThe AI Act Deadline Passed on 2 August and Nothing BitWhy Construction Keeps Shrinking While Confidence ImprovesAccession Talks Stall Again and September 1 Is the TestBrussels Applied a Trade Deal It Cannot Yet RatifyAfrica’s Power Market Now Needs Money More Than BlueprintsLong-Term Budget Talks Enter Autumn Without a Council LineForeign Subsidies Enforcement Now Turns on a Dublin RaidWho Writes Europe’s Telecom Rules Once Copper DisappearsDisability Cards Exist on Paper and Nowhere Else Until 2028Losing Visa-Free Travel Now Takes a Thirty Percent SwingTwenty Flagship Actions Will Test Whether the Culture Compass WorksEurope’s Quality Jobs Act Now Rests on What Unions Do by SeptemberDoes a Three Euro Parcel Duty Change Anything About Cheap Imports

Fake Invoices and Chinese Clothing Fuel a 33 Million VAT Fraud

Dubravka Ugrešić
Policy Tracker, Anti-Fraud (OLAF)

Venice: Prosecutors from the European Public Prosecutor’s Office asked an Italian judge on 10 August to place two suspects under house arrest over a VAT fraud that investigators value at more than 33 million euro. The scheme allegedly moved clothing from China into the European Union and sold it across Italy without the tax that should have followed the goods.

According to the EPPO, the two men exercised de facto control over a cluster of companies from 2019 onwards. Those firms imported garments, declared them at customs, and then pushed them through a chain of short-lived intermediaries that dissolved before any tax office came knocking. Officers searched premises and seized assets alongside the arrest request, which the EPPO set out in its case announcement.

The mechanics matter more than the headline figure. A carousel works because VAT travels with an invoice rather than with a physical box. One company in the chain collects the tax from a buyer, then disappears without remitting it, while the next link claims a refund on the same transaction. National tax authorities each see one slice of the loop and rarely see the whole circle. That blind spot is exactly what a cross-border prosecutor was built to close.

This case also sits at the junction of two revenue streams that Brussels has treated separately for decades. Customs duty and VAT arrive through different systems, different declarations and different national agencies. Undervaluing an import at the border shrinks the duty owed and quietly shrinks the VAT base that follows it. Traders who master one trick usually inherit the other.

The scale is no longer marginal. The EPPO ended 2025 with 3,602 active investigations and an estimated 67.27 billion euro in damage to EU and national budgets. Roughly 45 billion of that sits on the revenue side, in customs and VAT cases, which the office flagged in its analysis of the criminal ecosystem. Expenditure fraud still accounts for the larger share of files, but revenue fraud accounts for the larger share of money.

Sceptics make a fair point about conviction rates. An arrest request is not a verdict, both suspects retain the presumption of innocence, and complex carousel prosecutions often take years to reach an Italian courtroom. Asset seizure early in a case is frequently the only recovery a budget ever sees, because the paper companies hold nothing by the time investigators arrive.

Defence lawyers in similar Italian files have argued that shell structures reflect chaotic supply chains rather than criminal design, and that undervaluation disputes belong in administrative tribunals rather than criminal courts. Those arguments have succeeded before. Prosecutors counter that a pattern running six years across dozens of entities is hard to explain as accident.

The wider question is whether enforcement can keep pace with volume. Low-value consignments from Asian platforms have multiplied faster than customs staffing, and member states have yet to agree how the coming EU Customs Authority will share risk data with prosecutors. Until that plumbing exists, cases like Venice will keep arriving one raid at a time.

Italian courts will now decide whether the house arrest request stands. Whatever the ruling, the file gives the EPPO another concrete example to wave at finance ministers who still treat VAT fraud as a domestic housekeeping problem rather than a European one.

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