France delays EU move to fight VAT fraud

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Signs that the Government is winning its fight against a multi-billion pound tax fraud were undermined yesterday by news that France was delaying a UK-led plan to combat the criminal gangs involved.

The volume of imports and exports affected by the so-called "missing trader" VAT fraud fell to its lowest level in three years after peaking at around £5bn a month last year, official figures showed.

The monthly trade figures from the Office for National Statistics also showed the UK had notched up a record trade deficit with countries outside the EU because of the strong pound and its growing bill for imported energy.

Officials said a surge in arrests and prosecutions, tighter controls of VAT repayments and the strong message sent out by the EU had combined to break up criminal networks and deter new fraudsters.

But a Brussels deal to make it harder for fraudsters to import goods, claim a VAT rebate and then export the goods without paying the tax, had hit objections from Paris.

Gordon Brown told MPs last month he was confident a deal had been done after he had "reached an agreement" with France.

But the Treasury said yesterday that French officials had raised some issues. "They have a couple of technical questions but clearly we want this to go through and be squared off at a ministerial level," a Treasury spokesman said.

The Treasuryestimates the cost to the Exchequer of the fraud, for 2005-06, at up to £3bn a year. The con is also known as "carousel fraud" as the same goods can be used several times.

Meanwhile, the trade figures showed Britain's goods trade gap grew to £7.19bn in November from £6.60bn in October as growth in imports outstripped exports. The goods trade gap with non-EU countries hit an all-time high of £4.63bn, up from £3.95 billion in October.