The European Public Prosecutor’s Office released its annual report stating that tax evasion on value-added tax is the largest source of financial loss for the European Union, including tactics such as undervaluing products by taking advantage of tax exemptions for low-priced products purchased online from China. Additionally, there are cases of tax evasion through the disassembly and smuggling of electric bicycles exported from China to the EU.
According to the report for the year 2024 released by the European Public Prosecutor’s Office (EPPO) on Monday, a total of 2,666 investigation cases were conducted last year, estimating that these crimes caused a financial loss of 24.8 billion euros to the EU, with 53% attributed to value-added tax evasion, totaling around 13.15 billion euros.
The European Public Prosecutor’s Office is an independent judicial institution established by the EU in 2017 with the aim of investigating crimes that result in financial losses to the EU, including tax evasion, money laundering, and corruption. The threshold for investigation is cases involving over 10,000 euros of EU funds or over 10 million euros of cross-border value-added tax.
The annual report highlights that value-added tax evasion mainly occurs through the importation of electronic products such as mobile phones and has developed into a systematic organized crime. For example, the tax amounts collected from consumers are not truthfully reported to tax authorities, or products purchased at low prices online to avail tax exemptions are intentionally undervalued.
Currently, the EU exempts customs duties for imports of parcels under 150 euros. In February, the European Commission announced the cancellation of this tax exemption. The Commission pointed out that in 2024, there were 46 million low-priced goods imported into the EU, with an average of 12 million parcels arriving daily, 91% of which came from China, showing a doubling compared to the previous year.
According to a report by the Belgian newspaper “De Standaard,” Chinese e-commerce platforms like Temu have become hotbeds for tax evasion. As per the aforementioned report, Belgium suffered a financial loss of 611 million euros last year. The Liège Airport in Belgium serves as a major transit center for Chinese online purchases, with an average of 200,000 parcels arriving from China daily.
The report also points out that besides falsely reporting low prices to avoid customs duties, Chinese importers of online goods also falsely report products to redirect them to other EU countries to evade Belgian value-added tax. However, in reality, these products flow into the black market for sale.
The annual report by the European Public Prosecutor’s Office also revealed another pattern of crime related to Chinese imported products. In April of last year, the Office uncovered a batch of Chinese electric bicycles that were disassembled to avoid the EU’s anti-dumping duties on complete vehicle imports. Consequently, the bicycles were broken down into various parts imported into the EU and then reassembled.