European and African authorities have uncovered a series of large-scale customs and VAT fraud schemes involving Chinese companies over the past few years, resulting in billions of dollars in lost tax revenue across continents. Several cases showed that the illicit practices by Chinese sellers included under-declaring the value of the goods to evade customs and VAT taxes. “There are many cases where importers declare an incorrect value for their consignments to fall below the threshold and avoid customs formalities. This is fraud,” said Momchil Antov, a customs expert at Bulgaria’s D A Tsenov Academy of Economics.
Recently, the European Public Prosecutor’s Office (EPPO) came across fraud worth USD 820 million through false documentation of the imports by Chinese companies. The investigation, code-named ‘Calypso’, was carried out in 14 European countries, including raids in France, Spain, Bulgaria and Greece. EPPO said it has “dealt a significant blow to criminal networks flooding the EU market with goods fraudulently imported from China, while evading customs duties and VAT” by violating ‘customs procedure 42’.
The EPPO carried out 101 searches across these 14 countries and found the criminal scheme involving the massive imports of textiles, shoes, e-scooters, e-bikes and other goods from China. “At issue are several criminal networks, mainly controlled by Chinese nationals, that handle the full circuit of the goods imported from China into the EU market, including distribution to different Member States and sales to end customers, as well as money laundering and sending the profits back to China, while defrauding the payment of customs duties and committing large-scale VAT fraud,” it said.
After a few weeks, authorities seized EUR 3 million from a Greek customs broker linked with the Chinese imports fraud. European chief prosecutor Laura Kövesi said that Chinese criminal groups’ plans to dominate all supply chain production and evade taxes have harmed Europe-based producers. “We are targeting criminal networks organising massive imports of goods from China and evading customs duties and committing large-scale VAT [fraud],” she said.
Earlier this year, the Italian Financial Police executed a freezing order of EUR 71.05 million after it came across 13 suspects of Chinese origin, besides four Italians, in connection with multiple import-related tax offences. “On paper, the goods underwent multiple intra-community transactions between fictitious operators, accompanied by invoices for non-existent transactions,” EPPO said. “The investigation also revealed that the criminal group provided clandestine money transfer services to the Chinese community living in Italy, bypassing regular financial intermediaries and charging a percentage for the transactions.”
In another case in Germany, OLAF (European Anti-Fraud Office) carried out searches at 50 locations as under a criminal investigation fraud scheme involving goods imported from China. “The suspected fraudsters transported goods arriving from China via railway border crossings into Germany under a customs transit procedure, suspending customs duties and VAT,” OLAF said. In 2023, Chinese fraudsters were found importing textiles into the EU without paying the customs fees. “The Chinese fraudsters are extremely well networked and flexible,” said Deputy European Chief Prosecutor Andrés Ritter.
In 2024, Kenyan authorities prosecuted China Communications Construction Company Limited (CCCC) over tax evasion using fictitious invoices and claims for an inflated input VAT through shell companies. “Tax fraud investigations unearthed how the Chinese firm evaded the payment of over KES 1 billion in tax, and incomes were transferred through shell companies to accounts in China,” said the Kenya Revenue Authority. Similar cases of tax evasion were reported in 2023 and 2016.
A Chinese trader named Cai Ronggui was convicted of tax fraud amounting to KES 74 million in 2018 and 2019. He was jailed for four years by the Magistrate’s Court in Nairobi. Chinese companies topped the list of activities related to VAT fraud in Uganda in 2018. Of 143 listed companies, as many as 90 belonged to Chinese proprietors. During the same period, the Ghana Revenue Authority arrested two Chinese nationals for falsifying VAT invoices and evading tax payments.
South Africa Revenue Service (SARS) had seized 19 containers of clothing imported from China on charges of customs fraud. “Customs fraud, particularly in relation to clothing imported from China, is a systemic problem in South Africa,” said Minister of Trade, Industry and Competition. Nigeria has charged two Chinese mining companies with depriving the country of NGN 12 billion by evading VAT payment. Zimbabwe had arrested a Chinese businessman named Li Song for USD 40,000 tax fraud.