UK arrests five for selling 'dodgy' point of sale software
Turns a $100 bottle of wine into a $4 soft drink to avoid tax, earning probe by major governments
Tax authorities from Australia, Canada, France, the UK and the USA have conducted a joint probe into "electronic sales suppression software" – applications that falsify point of sale data to help merchants avoid paying tax on their true revenue.
A Friday announcement [PDF] from the Joint Chiefs of Global Tax Enforcement (known as the J5), states that the probe "resulted in the arrest of five individuals in the United Kingdom who allegedly designed and sold electronic sales suppression systems internationally."
These tools allow retailers to keep a separate set of books and launder money in one transaction
Those allegedly responsible started to export their wares during the COVID-19 pandemic.
"These dodgy sales suppression tools allow retailers to keep a separate set of books and launder the money in one transaction," explained J5 chief and Australian Taxation Office deputy commissioner John Ford.
"They conceal and transfer this income anonymously, sometimes offshore."
"So what might happen is that the customer orders a $60 steak and a $100 bottle of wine," Ford explained, at which point the software changes the transaction so it is recorded in the point of sale system as "a $10 bowl of chips and a $4 bottle of soft drink."
Such shenanigans are not transparent to customers, who still pay the full amount. But the retailer ends up with recorded revenue of $14, and $146 to launder.
The J5's statement about its probe asserts that ESS originated in the UK, and the developers of the naughtyware later exported it to the USA and elsewhere.
"This was a highly sophisticated, truly global attack on the international tax system," said Simon York, director of His Majesty's Revenue & Customs (HMRC) Fraud Investigation Service. "The group behind this activity is suspected of enabling thousands of businesses to evade tax in what is a large scale, technologically enabled fraud."
York added: "This is just the beginning of our work in this area, and we already have other suspected suppliers in our sights. We are urging all users of these types of systems to come to us before we come to them."
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Australian authorities raided 35 separate premises suspected of supplying and using the software.
Ford suggested sales suppression tech is also sold "as hardware that connects to point of sales systems, as cloud-based software, and as capability built directly into the software."
J5 tax agencies are now reviewing the records of known or suspected users of these technologies, and the group's statement on its probe includes a canned quote from Dutch tax authorities too. The Dutch agency is increasing its focus on cryptocurrency and virtual assets, and says it's investing in more technologically sophisticated methods of tracking crooks.
The J5 and other and individual tax agencies have promised ongoing action against the sources and users of these tools. ®