Customs on the hunt for VAT fraudsters

Customs officers were making "some progress" in tackling VAT fraud, according to the public finance watchdog, despite a sharp jump in the estimates of revenue lost to fraud.

A National Audit Office report published todaypraises Customs and Excise for getting to grips with the scale of the problem. It said Customs had had some success in tackling so-called "missing trader" fraud where criminals repeatedly import and export the same goods, fraudulently claiming VAT relief. Missing trader fraud losses fell slightly to £1.65bn-£2.64bn in 2002-03 from an estimated £1.77bn-£2.75bn previously.

But the "VAT gap" - the difference between theoretical and actual tax yield - rose by a whole percentage point from 14.7 per cent to 15.7 per cent.

Sir John Bourn, the head of the NAO, said: "They have achieved some progress, for example on missing trader fraud, but success will ultimately turn upon whether they can secure a sustained reduction in the level of losses."