TAXPAYERS FOOT THE BILL FOR £2 BILLION VAT FRAUD

12.00.00am BST (GMT +0100) Wed 9th Jul 2003

Commenting on today's trade figures, which showed that VAT fraud had led to an upward revision in the trade deficit of £18.2bn over the last two years, David Laws MP, Liberal Democrat Shadow Chief Secretary to the Treasury,

said: "These astonishing figures highlight the massive amount of VAT fraud over the last few years."

"The Government needs to hold an urgent inquiry into the vast amounts of money lost. Fraud mean means taxpayers end up paying more to invest in health, education and the police."

"This is yet another example of the incompetence of the tax collectors and highlights the need for a review of these agencies."

ENDS

1. Today's trade figures show that the UK current account deficit over the last two years has been around 2% of GDP - compared to the 1.0 -1.5% that the figures had previously shown. The deficit was revised upwards by £11.1bn for 2002, £7.1bn for 2001 and by smaller amounts for previous years.

2. The revisions have been due to accounting for 'VAT missing trader fraud' which on the latest Treasury estimates is costing over £2bn per year in lost revenues.

3. Matthew Taylor MP, Liberal Democrat Shadow Chancellor, in September 2001 raised queries about UK trade statistics - which now appears to have been partially caused by the increase in VAT fraud. Mr Taylor's letter noted that, but did not receive a substantive reply from the Treasury, 'this has implications for economic policy and for the way that financial markets perceive economic policy' and asked for explanation of whether the divergence was 'purely an artefact of statistical collection, in which case there should be little concern - but more understanding, or whether one of these statistical agencies is publishing misleading information.'