Carousel fraud in electronics: the VAT the missing trader never pays becomes the discount, and the European rule that allows it has been "transitional" since 1993
8 October 2026, 18:17
On 7 October the European Public Prosecutor's Office ordered searches in eight countries for the Hermes investigation, a VAT carousel fraud in electronics. In Italy the Varese Guardia di Finanza, the tax police, carried out six precautionary measures and a seizure of up to around €11 million. The Italian companies involved number 93, with invoices alleged to be false for over €450 million from 2022 to 2025. The suspects are presumed innocent.
A company with no employees, registered in the name of a front man, the "missing trader", buys without VAT from a supplier in another EU country and resells in Italy with VAT on the invoice. It collects that VAT and never pays it over: that is how it can sell "below cost". After 24 months at most it closes, and another one is born. At the end of the chain a real business buys at that price and deducts VAT that nobody ever paid to the State. Often the goods go back abroad and the carousel starts again.
In plain terms: the discount is the VAT. It is the television that fell off the back of a lorry, with two differences: this one comes with an invoice, and nobody asked it anything at the border.
The gap, however, was not opened by the fraudsters. Since 1 January 1993, when tax borders were abolished, goods traded between businesses in different countries cross the border tax-free. The buyer adds VAT to the foreign supplier's invoice itself and records it both as output tax and as input tax: it owes it and recovers it at the same time, and nothing reaches the State. The VAT that has to be paid over arises when the goods are resold in Italy, and that is the VAT the missing trader collects and keeps. Article 402 of Directive 2006/112/EC still says that this system "is transitional and shall be replaced by definitive arrangements". The Commission withdrew its 2018 proposal last year.
For phones, tablets and laptops sold between businesses, Italy has already shifted VAT onto the buyer, but only for those products. From 1 July 2030 sales between different countries will be reported to the tax authorities invoice by invoice: missing traders will be spotted sooner, but the goods will still travel without VAT.
Besides the State, the honest shop loses out, beaten by prices that anyone who pays VAT cannot afford.
Anyone who buys from a missing trader is at risk too: in the Kittel judgment of 6 July 2006, the European Court of Justice ruled that the deduction is denied to anyone who knew or should have known of the fraud. If a brand-new supplier sells below the price at which the goods can be bought legitimately, the discount is often someone else's VAT.
The question, for the European Commission: who closes the gap, if even after 2030 goods will cross borders without VAT?
The missing trader lasts two years at most. The gap it slips through, thirty-three.
This article was prompted by a news item published in ANSA on 8 October 2026.