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Italian financial authorities have unveiled a wide-reaching tax evasion scheme allegedly orchestrated by a network of Chinese-run businesses, raising alarms over threats to both Italian public revenues and broader European Union financial integrity.
According to a statement by the Guardia di Finanza in Pordenone, a total of 15 Chinese nationals are under investigation for orchestrating a €10.5 million ($11.95 million) VAT fraud operation involving 13 companies across Italy’s Friuli region. The alleged fraud resulted in €5.5 million ($6.26 million) in unpaid VAT alone.
Fictitious Invoices, Shell Companies, and Fraudulent Filings
The accused companies allegedly manipulated tax returns using fictitious invoices tied to fake domestic suppliers. In reality, the goods mostly textiles and clothing were smuggled into the country through untraceable supply routes from China, bypassing Italy’s customs system and tax obligations.
The European Public Prosecutor’s Office (EPPO) in Venice coordinated the investigation, which revealed a sophisticated network of shell entities many of which had:
- No physical offices
- No employees
- No legitimate economic activity
Several companies shared addresses, consultants, and even personnel backgrounds. Some of the administrators were former couriers or waiters with no business experience, raising red flags about the legitimacy of their rapid commercial success.
Within months, the companies’ declared revenues jumped from minimal figures to tens of millions of euros, yet no taxes were paid.
Classic Carousel Fraud Pattern
Authorities described the scheme as a carousel fraud, a form of tax evasion in which fictitious trade routes are created to falsely claim VAT credits and conceal the true origin of imported goods.
Although some transactions appeared to use standard banking channels, traced payments were later rerouted abroad primarily to China to obscure the real beneficiaries.
Ongoing Crackdown on Tax Evasion
The operation marks part of a broader national and EU-wide effort to stamp out tax fraud schemes that distort markets and drain public finances. The Venice EPPO office, alongside the Guardia di Finanza, emphasized that these actions are essential to:
- Level the playing field for law-abiding businesses
- Protect public resources allocated under EU financial programs
- Prevent misuse of cross-border commercial structures
So far, 14 suspects are charged with filing false tax returns, while one individual is believed to have orchestrated the issuance of fake invoices that formed the backbone of the entire scheme.
What’s Next?
As legal proceedings unfold, the case underscores the growing reach and capability of EU institutions like the EPPO to coordinate transnational tax enforcement. With VAT fraud schemes becoming increasingly complex and international, the need for cross-border cooperation remains more urgent than ever.
This investigation serves as a warning to those leveraging international business loopholes to exploit European tax systems: such activities are firmly in the crosshairs of EU financial watchdogs.
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