The operation, code-named Domino, was triggered by the arrest of a 45-year-old German national at an address in Rochdale, Lancashire. He is currently subject to extradition proceedings on behalf of the German authorities over alleged tax offences in Germany.
A 42-year-old British national was also arrested and interviewed in relation to charges of money laundering and cheating the public revenue.
In addition to the arrests, three addresses in Rochdale were searched and visits made to a large number of companies across the country that are thought to have had dealings with companies operated by the arrested men.
The fraud, known as missing trader fraud, occurs where fraudsters obtain VAT registration to acquire goods VAT-free from other Member States. They then sell on the goods at VAT inclusive prices and disappear without paying over the VAT paid by their customers to the tax authorities.
The most abusive form of the fraud is "carousel" fraud, where the same consignment of goods is sold through a series of contrived transactions back and forth between Member States in order to steal the sums charged as VAT every time the goods go around the circle.
It is a real problem for the Exchequer, apparently costing between £1.06 billion and £1.73 billion in stolen VAT in 2003/04.
"This type of serious fiscal crime is highly organised and crosses national boundaries, demanding a high degree of international co-operation between the authorities," said Jim Jarvie, Customs Assistant Chief Investigation Officer.
