It’s already a problem in Europe, but it could be crossing the Atlantic soon, if Congressional leaders like Harry Reid and Nancy Pelosi have their way. Some Democrats are now promoting the European-style value-added tax (or VAT) to collect revenue. After all, Democrats never found a tax they didn’t like. But it has the unintended consequence of promoting billion dollar fraud and graft — Europeans have termed it “carboncarousel fraud,” because criminals take something intangible like “carbon credits” and launder it around and around.
[UK Guardian] The fraud occurs when a trader of carbon credits in one EU country buys some from another country free of VAT, then sells them on, charging the VAT to the buyer. The seller then disappears without handing the VAT to the taxman.
Some criminals re-export the credits, reclaiming VAT as they do so, then re-import them. They can do this repeatedly, reclaiming VAT many times, hence the “carousel” label.
Yet another example where even with the best of intentions government busy-bodies do more harm than good. In this case, even criminals can get behind the facade of environmentalism. Where will it end?