EU suspects tax fraud at China’s ‘gateway to Europe’ as state-owned shipping firm Cosco faces mounting opposition abroad
Investigator says agency has evidence that Chinese firms run by criminal groups were fraudulently avoiding the VAT and duties on large shipments through Piraeus port
European Union and Italian authorities are investigating suspected wide-scale tax fraud by Chinese criminal gangs importing goods via Greece’s largest port, a trade gateway between China and Europe, officials said.
The investigation at Piraeus port came as its majority stakeholder, Chinese state-run company Cosco Shipping, faced mounting concerns over a multibillion takeover bid that could see it acquire a container terminal in the US.
The European Anti-Fraud Office (OLAF) confirmed it was working with Italy on the investigation into the suspected tax scams, but declined to give details. But Fabio Botto, of the Italian Central Anti-fraud Office, said they were completely avoiding taxes.
“The VAT is completely evaded, with enormous damage to the national tax authorities and to the community,” Botto said.
Botto said the suspected scam at Piraeus – considered the “gateway to Europe” as part of China’s vast “Belt and Road Initiative” – had cost Italy tens of millions of euros in unpaid value-added taxes (VAT). He said his agency had evidence that Chinese-owned firms run by the criminal groups were fraudulently avoiding the charges on large shipments of goods through Piraeus.
The groups import goods, often counterfeit clothing and footwear, and massively understate their value to EU customs to avoid import duties, he said. They also lie about the firms that receive the goods, enabling them to avoid VAT.
Greece’s Financial Crime Unit is conducting a separate investigation into a suspected tax fraud case involving Chinese goods imported via Pireaus. The Greek unit has had little contact with Italian and EU authorities and has not been informed about the wider investigation, an official there said.
Botto and the Greek official said neither investigation had evidence of any wrongdoing by Piraeus port authorities. Chinese state-owned Cosco Shipping owns the majority stake in the Piraeus Port Authority (PPA), which manages one container terminal. A wholly-owned Cosco subsidiary also owns and manages two other terminals.
In a statement, Cosco said: “The company has in its global operations consistently and strictly followed local and international laws, and persevered to operate legally and compliantly”.
PPA said it had not received any information about criminal groups using the port and it would alert authorities if it did. It said it took all necessary measures to ensure that goods had customs supervision but it is “under no circumstances responsible for conducting checks for illegal activities”.
Without mentioning the suspect firms in the investigation, Botton said Piraeus – which has seen a six-fold increase in import capacity under Cosco – had become a major new entry point for smuggled goods as northern ports tightened controls.
“We are investigating the new routes developing with the Belt and Road project. Currently the predominantly beaten path appears to be through Piraeus,” he said.
Meanwhile, Cosco has also come under pressure from US regulators who have reportedly raised concerns about the company taking control of a container terminal at the Port of Long Beach, California.
According to a report in The Wall Street Journal on Friday, objections were raised by the Committee on Foreign Investment in the United States about Cosco’s planned US$6.3 billion acquisition of Hong Kong-based company Orient Overseas International, which has US assets.
The assets include a nearly fully automated terminal known as the Long Beach Container Terminal, for which Orient Overseas has a long-term lease.
Citing unnamed source, the Journal reported that Cosco executives have proposed to divest or carve out the Long Beach terminal, though it’s not clear that would be enough to satisfy concerns over the multibillion-dollar deal.
Cosco did not respond to an email seeking comment on the matter. The committee is chaired by the Treasury Department and focuses on national security. A Treasury spokesman declined to comment.
Additional reporting by Associated Press