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IT SEEMS officials at DEFRA (Department for the Environment, Food and Agriculture), the UK, are determined not to be outdone when it comes to dreaming up new tax proposals.

After plans for a tax on household rubbish were floated by the Performance and Innovation Unit (PIU), Whitehall's finest have announced plans for a 10p tax on carrier bags.

The proposals are to be field-tested in a survey of supermarket shoppers in the next few months. The scheme has been hailed as a success in Ireland, where it led to a 90 per cent drop in the number of carrier bags being used.

The Irish experience seems to have persuaded Environment Minister, Mr Michael Meacher, to press ahead with the trials. Funds raised through the tax in Ireland have been used to create a department dedicated to dealing with the environmental threat posed by the disposal of old fridges and freezers.

A DEFRA spokesman said, "We will now want to know whether people in Britain will react in the same way and regard such a tax as a deterrent to waste, rather than as a penalty or a tax. On the face of it, it looks as though it is an effective policy, but we will have to be sure it will work equally well here."

Mobile phantom

STOKE-ON-TRENT in North Staffordshire, the UK, has become the centre for large-scale VAT fraud involving mobile phones. The Guardian reports that the city is at the heart of a wave of fraud that may have already cost taxpayers £10 billion.

The fraud relies on the fact that no VAT is charged for trading between EU countries. A front company is used to import the phones VAT-free from within the EU and to then sell them on to other traders in the UK charging VAT at 17.5 per cent. The fraudsters pocket the VAT money and disappear.

In more sophisticated versions called carousel fraud, the phones are imported VAT-free, and then pass through a number of traders, one of whom will disappear with the VAT. The phones then leave the UK, only to return later to go round again with a new missing trader. In some cases the mobile phones never leave the warehouse. Only the paperwork shows movement.

The fraud centres around Stoke-on-Trent, where many arrests have already been made. Customs is putting extra staff on the case to deal with the missing trader scam, and all VAT offices have been alerted. Innocent parties are being caught up in the fraud and are being arrested in an over-reaction by Customs.

The Guardian says that one of those arrested, but not charged, is a Stoke bar owner, Stu Baillie, who has been trading in mobile phones for several years. He claims customs officers arrived at his house and he was questioned about his alleged involvement in VAT fraud. Computers from his office and home were seized.

Overreaction: The legitimate mobile phone industry is being affected by Customs' overreaction to the fraud. Tax consultant, Mr Don Mavin, claims Customs is panicking and refusing to pay out legitimate VAT repayments until checks have been made on the entire trading chain.

(Source: AccountingWEB.)

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