British Prime Minister Theresa May and German Chancellor Angela Merkel attend  the EU summit in Brussels on March 9, 2017.     Photo: Reuters
British Prime Minister Theresa May and German Chancellor Angela Merkel attend the EU summit in Brussels on March 9, 2017. Photo: Reuters

Britain could be hit with a US$2.1 billion fine after a European Union report claimed the UK “turned a blind eye” to customs avoidance by Chinese smuggling gangs.

A report released by the EU’s anti-fraud office, OLAF, said “continuous negligence” by British officials has deprived the EU of 1.99 billion euros in lost duties on cheap Chinese clothing and shoes.

OLAF accuses Britain of allowing the scam to continue by ignoring widespread use of fake invoices and incorrect customs declarations by Chinese importers between 2013 and 2016. “Despite repeated efforts and in contrast to the actions taken by several other member states to fight against these fraudsters,” the tax fraud in Britain continued to grow, it said.

The office said that the scheme also cost other EU countries – such as France, Germany, Spain and Italy – 3.2 billion euros in lost value-added tax.

The fraudsters “are in fact organized crime groups whose actions affect the entire EU; they operate in criminal networks active across the EU,” OLAF said.

“As far as OLAF is aware, the UK authorities have not introduced risk profiles and the measures that they have taken do not appear to have curbed this traffic.

“To date, they have not initiated any criminal investigations in relation to these frauds.”

OLAF said the scam has been going on for years and that still no real action has been taken, and has urged the European Commission to send Britain a bill for the lost revenue.

The UK government said it rejected the EU report and insisted Britain was tough on fraud.

“We don’t recognize the figures. They are currently being examined by HM Revenue & Customs,” a spokesman for British Prime Minister Theresa May said, adding that the UK is considering how to respond.

“We have not received a bill from the European Commission. This report is not a bill, it is an estimate,” he said. “UK Customs takes all allegations of fraud seriously and investigates thoroughly.”

The matter was an “entirely separate and unrelated matter to the Brexit negotiations,” he added.

The claim comes at a sensitive time in EU-Britain relations, just before London is to embark on Brexit negotiations in which the UK’s exit bill – estimated at US$63 billion – has already sparked sharp exchanges.

May sits down with other EU leaders in Brussels today and then plans to start formal Brexit negotiations within a fortnight.

The allegations could prove especially embarrassing for the prime minister as she was Home Secretary, the minister responsible for Britain’s border and customs agencies, between 2010 and 2016.

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