Latvia opens several criminal cases over disguised fuel schemes

Latvia's Tax and Customs Police have in recent years opened several criminal cases over so-called engineered fuel schemes involving Latvian companies, Latvian Television's programme "De facto" has found. In such schemes, petroleum products are declared in documents as oils but later sold as fuel without paying excise tax. The European Public Prosecutor's Office (EPPO) is also investigating similar fraud, and has focused on deliveries of Latvian-origin petroleum products to Germany. The police do not say which companies are involved, as the investigation is ongoing.

How the scheme works

Diesel is subject to high excise tax and its transport is strictly controlled. Lubricants can be moved with ordinary documents and no excise. Fraudsters add base oil and chemical additives to fuel so it can be presented as a lubricant, then sell it as fuel in another country. The mixture is hard to tell apart from diesel by sight; a customs laboratory can do so.

The German case

Two years ago, German customs investigators searched 32 addresses. At a Bavarian fuel trader, five tankers from Poland were stopped. In under a year, about 90 million litres of the product were delivered to him, and 44 million euros in taxes went unpaid. In September this year he was sentenced to six years and three months in prison; the ruling is not yet final. EPPO continues to examine his dealings in an investigation called "Water into Wine". In June, searches took place in six countries, including Latvia. Germany and Poland estimate tax losses at more than 240 million euros.

State Revenue Service checks

Baiba Šmite-Roķe, Director General of Latvia's State Revenue Service (VID), says Latvia is more concerned about its reputation, since the tax losses fall on the country where the fuel is sold. Last year almost 106,000 tonnes of lubricants and similar products were shipped from Latvia to other EU states, two thirds of it to Germany and Poland. Volumes have more than quadrupled since 2019.

VID has classed the lubricants of five companies as fuel oil and assessed excise tax: IC Trading 137,303 euros, Pars termināls 63,104, Rietumu nafta LV 40,115, Gotika auto 37,828 and RMNS 14,238. Four companies have appealed. In October, according to unofficial information, the Tax and Customs Police searched several sites in Daugavpils in connection with the lubricant producer Mix oil.