EU suspects tax fraud at China's new gateway to Europe

Piraeus Port Authority SA

23/04/2018 08:09

(Repeats story from Friday)
    By Angus Berwick and Renee Maltezou
    MADRID/ATHENS, April 23 (Reuters) - European Union and
Italian authorities are investigating suspected wide-scale tax
fraud by Chinese criminal gangs importing goods via Greece's
largest port of Piraeus, a trade gateway between China and
Europe, officials said.
    "The VAT is completely evaded, with enormous damage to the
national tax authorities and to the community," Fabio Botto, of
the Italian Central Anti-fraud Office's special investigative
unit, said in an interview.
    He said the suspected scam at Piraeus, part of China's vast
Belt and Road infrastructure project, had cost Italy tens of
millions of euros in unpaid value-added taxes (VAT), though the
total could be far higher as the investigation was not over.
    The European Anti-Fraud Office (OLAF) confirmed it was
working with Italy on the investigation but declined to give
details, citing confidentiality.
    Botto said his agency had evidence that Chinese-owned firms
run by the criminal groups were fraudulently avoiding import
duties and VAT on large shipments of goods through Piraeus.
    The groups import goods, often counterfeit clothing and
footwear, and massively understate their value to EU customs to
avoid import duties, he said. They also lie about the firms that
receive the goods, enabling them to avoid VAT.
    Greece's Financial Crime Unit is conducting a separate
investigation into a suspected tax fraud case involving Chinese
goods imported via Pireaus. The Greek unit has had little
contact with Italian and EU authorities and has not been
informed about the wider investigation, an official there said.
    China's state-owned COSCO Shipping  601919.SS   1919.HK  has
majority-owned Piraeus since 2016.
    China wants to transform the port into its "gateway to
Europe" under the billion Belt and Road initiative, which
envisions a new "Silk Road" of land and sea routes with trading
partners.
    Botto and the Greek official said neither investigation had
evidence of any wrongdoing by Piraeus port authorities. COSCO
owns a majority stake in the Piraeus Port Authority (PPA)
 OLPr.AT , which manages one container terminal, and a
wholly-owned COSCO subsidiary owns and manages two other
terminals.
    COSCO said: "The company has in its global operations
consistently and strictly followed local and international laws,
and persevered to operate legally and compliantly".
    PPA said it had not received any information about criminal
groups using the port and it would alert authorities if it did.
It said it took all necessary measures to ensure that goods had
customs supervision. 
    "(PPA) is under no circumstances responsible for conducting
checks for illegal activities," PPA said in a statement.
    OLAF and national authorities in recent years have clamped
down on customs loopholes used by Chinese smugglers, whose tax
scams they estimate cost the EU billions of euros a year.
    Italy began investigating the Piraeus case in late 2017
after seizing falsified invoices at customs offices, Botto said.
Reuters has not seen this evidence and Botto declined to name
the suspect firms as the investigation is ongoing.
    Piraeus has become a major new entry point, Botto said, as
northern ports have tightened controls and Piraeus's import
capacity has leapt six-fold under COSCO.
    "We are investigating the new routes developing with the
Belt and Road project. Currently the predominantly beaten path
appears to be through Piraeus," he said.

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Map of China's Belt and Road initiative    http://fingfx.thomsonreuters.com/gfx/rngs/CHINA-SILKROAD-SECURITY/010040B60P7/CHINA-SILKROAD-SECURITY.jpg
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 (Writing by Angus Berwick
Additional reporting by Lefteris Papadimas in Athens and Brenda
Goh in Shanghai
Editing by Mark Bendeich and Giles Elgood)
 ((angus.berwick@thomsonreuters.com; Desk: +34915852153; Mob:
+34661832451; Twitter @AABerwick;))