Norway latest to announce carbon fraud crackdown

Norway looks to have become the latest in a string of European countries to fall foul of complicated fraud involving EU carbon credits.

Three people were charged late last week with alleged VAT fraud, while at least two firms are also under investigation over suspected fraudulent trading of EU emission allowances.

The Norwegian government also announced it will emulate a number of other European governments by changing the rules governing VAT to tackle so-called carousel fraud.

None of the companies or individuals under investigation were named by the government, but Reuters reported that tax officials believed the alleged fraud cost 127m Norwegian crowns (£14m).

The news agency also quoted Oeyvind Bakken of Norway's tax authority as saying that Oslo-based Green Plus Energy AS and Gct AS are the two firms being investigated. "We have a court order granting us control over the assets of these companies," he said.

Norway is not part of the EU, but operates its own carbon market that integrates with the EU's wider emissions trading scheme (ETS).

Carousel fraud has become a worrying feature of the ETS in the past year, with the European police agency Europol revealing late last year that it believes VAT fraud involving carbon credits has cost taxpayers up to €5bn (£4.5bn) in lost revenue over the past 18 months.

The fraud works when fraudsters sell carbon credits and collect the accompanying VAT, but disappear before the money is handed over to the tax man. It is known as carousel fraud because the fraudster can relatively easily repeat the process many times over.

Authorities across Europe have attempted to mount a crackdown against the practice, with proposals for VAT reform currently being debated in Brussels and France, and the Netherlands, the UK, Spain and Denmark having all changed tax rules to ensure VAT is collected from the purchaser, rather than the organisation buying the credits.

There have also been a number of arrests with Belgian authorities arresting three British suspects in connection with an alleged €3m fraud last month. That followed the arrest of four people in France over suspected connections to a €156m carbon carousel fraud, while seven people were arrested in London last year over an alleged £38m VAT fraud involving carbon credits.