Blümel: Fraudulent fruit-growers are harming Austria as a location, as well as buyers and consumers, to the tune of around EUR 10 million!
Financial Police uncover fruit fraud: EUR 681,000 in losses; tax investigators calculate an additional EUR 9 million in losses resulting from input VAT fraud
Using counterfeit delivery notes, fruit-growers and wholesalers have been declaring imported fruit as Austrian produce and selling it as such to food wholesalers and supermarket chains," reported Finance Minister Gernot Blümel, declaring yet another impressive success in the fight against fraud. A number of fruit-growers have been attempting to offset the substantial frost damage caused in 2016 and 2017 by deploying such illegal schemes. At the end of 2017, within the framework of a targeted campaign, the Financial Police investigated six fruit-growing operations in Lower Austria and three in Styria. These investigations, and analysis of the fraudulent activities, in particular relating to two businesses, led to checks on 25 further businesses. The marketing agency Agrarmarkt Austria, the Chambers of Agriculture and regional governments were involved in the work undertaken by the Financial Police. In two instances of businesses undergoing checks, the acting Financial Police filed criminal charges with the Public Prosecutor's Office. The judgments of the Graz and Krems Regional Courts range from monetary fines to suspended prison sentences.
In financial terms, the losses amounted to EUR 681,000. The Financial Police calculate these losses based on the difference in the purchase and resale prices of Austrian and foreign fruit, and a statutory audit undertaken by the Tax Office also yielded a substantial retrospective tax demand. In addition, in one of the two cases, tax investigators identified a loss totalling EUR 9 million as a result of input VAT fraud.
"The fraud committed against buyers and subsequently also against the end consumer, the discrediting of domestic food producers, plus the tax fraud involving tax evasion, tax avoidance and unlawful tax receipts could scarcely be more brazen," is how Austria's Finance Minister expressed his consternation. "Anyone who obtains an unfair advantage is entirely going against the principle of fair taxation, which is important to us all. In these cases, everyone involved is a victim of fraud, from competitor to consumer. I cannot understand it, and will still less tolerate it!" Further investigations into fruit fraud by the Financial Police are therefore still ongoing.
Styrian fruit-grower claims 155 tonnes of Hungarian apricots and 457 tonnes of Czech apples are "Austrian"
In 2016 and 2017, a Styrian fruit-grower bought around 155 tonnes of apricots in Hungary and labelled them with his own labels bearing the wording "Country of origin: Austria". He sold the Hungarian fruit on to his buyers, including a wholesaler in the hospitality industry, as Austrian produce.
In order to thwart checks by the Market Office, he proposed a deal to a Lower-Austrian fruit-grower: his colleague was to prepare delivery notes for the apricots in the amount purchased from Hungary. In return, the Styrian offered the prospect of an inflated price for the Lower-Austrian producer's apples, which he wished to purchase. Yet even in relation to this accomplice, the Styrian fruit-grower broke his word, for the promised purchase of apples never took place.
Despite cultivating apricots, the Lower Austrian producer would not have been able to supply apricots; as a result of frost, he had suffered an almost 100% loss of his harvest. Compensation payments were made for this from frost damage insurance and a disaster fund.
As a result of his fraudulent activities, in the two years in question, measured in terms of the price difference between Hungarian and Austrian apricots, a total loss arose of approximately EUR 93,000. In May 2018, the Styrian fruit-grower was handed down a suspended sentence of six months for serious fraud by the Graz Regional Court. The Lower Austrian involved had a lesser penalty imposed in the proceedings in the form of a monetary fine.
EUR 9 million losses as a result of input VAT fraud and serious commercial fraud
Independently of the investigations by the Financial Police, tax investigators in Graz also succeeded in putting a stop to input VAT fraud on the part of the same Styrian producer. As alleged authorized representative of 48 foreign companies, he had submitted applications for VAT refunds to the Tax Office. However, during the course of their investigations, tax investigators discovered that the fruit-grower had forged all the powers of attorney from the foreign companies which he presented. In addition, he had himself forged invoices of agricultural producers who had allegedly sold apples to Moldova, Romania, Bosnia and Croatia, even as far as corresponding transportation paperwork. The defendant even had company stamps and customs stamps made in order to be able to falsify these documents. The declared shipments of apples abroad did not take place at all.
Tax investigators have assessed the loss incurred as a result of the input VAT fraud at EUR 9 million, and have filed an action against the Styrian fruit-grower for serious commercial fraud. The Public Prosecutor's Office has brought formal charges, and the case is still pending.
Lower-Austrian family business sells 457 tonnes of apples from the Czech Republic as "Austrian" produce and misuses AMA quality seal
A Lower-Austrian family business operating in the fruit and vegetable business also acted more than audaciously. In 2016 and 2017, the business purchased in total around 457 tonnes of apples in the Czech Republic, which were subsequently sold as Austrian Golden Delicious, Braeburn and Gala. As a result of purchasing the significantly cheaper Czech apples, compared with other reputable business operators this business established for itself a significant advantage in terms of pricing in relation to its own buyers. The business supplies fruit and vegetables not only to customers from the hospitality and hotel industry – including gourmet restaurants – but also supplies regional hospitals and regional care homes.
In order to resell the foreign apples as Austrian to other domestic fruit-growers, two uninvolved agricultural producers were induced into revealing their AMAG A.P. certification numbers on the pretext of initiating business relations. Using this certification, the agricultural industry's "AMA quality seal", the intention was to fake the Austrian origin of the apples. The subsequent sale of what were in reality Czech apples was undertaken using the AMAG. A.P certificate numbers belonging to other companies without the knowledge of the actual certificate holders.
Invoicing for all the Czech apples was to a further company belonging to the private limited trading company in the guise of an internal purchase of Austrian apples. In this way, the actual origin, the Czech Republic, was intended to be further concealed. In addition, the Lower-Austrian wholesaler issued to himself fictitious invoices from former suppliers relating to apple purchases without their knowledge, and also himself cashed in the relevant cheques at the bank. It should be said, however, that the suppliers in question had in some cases for years no longer had any business relations whatsoever with the trader.
As a result of the difference between the purchase and resale prices as between the Czech and Austrian apples, a total loss of EUR 335,495 arose. A statutory audit conducted in 2018 by the Tax Office relating to the years 2012 – 2017 yielded a retrospective tax claim of EUR 252,000.
At the beginning of September 2020, the final curtain came down on this criminal intrigue, with the fraudulent managing director receiving a conditional sentence of 13 months from the Krems Regional Court.
Austrian Finance Minister Blümel expressed his anger: "These fruit fraudsters have done no favours to honest family farming businesses who supply the population with their high-quality produce", adding a strong message of support for domestic quality produce: "The enduring maximum, of buying regional, local and seasonal, must not be tainted by such fraudulent activities! The vast majority of our domestic food suppliers demonstrably succeed in supplying their excellent produce to the population in a fair and honest way. It is important to continue supporting this!"
"These criminal schemes harm Austria as a business location, the reputation of the industry and all honest taxpayers. The majority of business operators pay the taxes they owe. The work undertaken by the Financial Police and tax investigators in combating fraud is owed to these hardworking economic operators as well as to all taxpayers!" affirmed Blümel.