The finance ministry in Baden-Wuerttemberg knows of at least one case of fraud in the German power market and last year investigated another potential case in the natural gas market.
The incident cost the Federal State about 2.8 million euros ($3.6 million) in tax revenue, according to Frank Kupferschmidt, a spokesman for Baden-Wuerttemberg’s finance ministry, which collects taxes in the state.
The German Federal Tax Office last month said it found signs of fraud in Europe’s biggest energy market that may be similar to the value-added-tax scam that roiled carbon permit markets in 2009 and 2010. The authority warned traders of the cases and the risks of engaging in illegal trading activities.
“The case of fraud in the power market was revealed after a company made a report to the national grid regulator last year,” Kupferschmidt said today in an e-mail. “The number of unrevealed cases is probably very high.”
Also last year, the Baden-Wuerttemberg finance ministry identified a Swiss-based company that “with a very high probability” was involved in plans for value-added tax fraud in the gas market, Kupferschmidt said. He declined to give further details on the case when contacted by telephone.
Under German tax law, finance ministries in the federal states are responsible for collecting taxes and investigating cases of fraud. Last week the Hamburg finance ministry said it was probing possible fraud in the German power and gas market.
The German grid regulator Bundesnetzagentur, which also oversees the nation’s energy markets, has received hints of potential fraud in the power and gas markets, Jennifer Rendla, a spokeswoman for the Bonn-based authority said today by phone. She declined to comment further.
VAT fraud in the European carbon market involved chains of bogus import companies set up to reclaim taxes that had never been paid. A Frankfurt court in 2011 convicted six men for evading a total of 260 million euros in taxes on carbon emission trades using the same tactics.
In Germany, about 295 billion euros of gas and power contracts were handled by brokers in London last year, according to Bloomberg calculations based on average prices and volume data from the London Energy Brokers’ Association.