HM Revenue & Customs (HMRC) said that reports last week overstated links between VAT fraud and terrorism but added that money generated from organised crime such as VAT fraud was bound to fund wider criminality.
Home Secretary John Reid said at a G6 meeting in Stratford-upon-Avon last week that proceeds from VAT fraud were funding terrorist groups according to reports in other press.
An HMRC spokesperson said: Any large-scale money flows arising from organised crime such as those generated by MTIC fraud are bound to be used to fund a range of other illegal activities.
Paymaster General Dawn Primarolo briefed ministers at the G6 conference on HMRCs clampdown on VAT fraud and urged closer relationships between tax enforcement agencies across Europe.
We have a shared agenda to tackle the organised crime groups behind carousel fraud and to reduce the economic and social costs of their crimes. We need to improve our ability to share intelligence and work together on criminal interventions the spokesperson said.
And where appropriate we need to share the evidence gathered through criminal investigations to support civil actions that will prevent the fraudsters having access to the proceeds of their crimes. HMRC is committed to working with our European partners to tackle this.