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Sudden! 13 Chinese sellers arrested, 71.05 million euros frozen...
Mar 19,2025
The European Union has been rocked by a blockbuster news. The Italian branch of the European Union's independent inspection agency EPPO showed the stage of "Operation Dragone": 17 people involved in the case were caught in the law. Four Italians and 13 Chinese were among those whose painstaking network of shell companies was breached, with up to 71.05 million euros in funds and assets frozen in an instant, sending a shockwave through the cross-border trade tax landscape.
This is no ordinary enforcement action, it is Italy's most aggressive shot at cross-border trade tax fraud since it strengthened VAT regulation at the end of 2024, and on an unprecedented scale.
An in-depth investigation found that the syndicate resembled a cunning "tax thieves" who carefully arranged 29 shell companies in Florence, Prato, and Rome to weave a seemingly sophisticated "import - transit - distribution" pipeline. Their tactics amounted to a "cover-up of the world."
Popular Chinese-made apparel, shoes, bags and other goods were cleared into the country by the CP42 process along the ports of Bulgaria, Hungary and Greece, but the goods were quietly shipped to Italian logistics centers.
Then, false invoices for intra-EU transactions appeared, and import duties and a high value-added tax of 17% -27% were delayed indefinitely, like a "delay spell."
These shell companies are also proficient in guerrilla tactics and have an average survival cycle of just 24 months.Account transfers were completed before the tax system sounded the alarm, using this delicate "time difference" to allow goods valued at more than €500,000 to travel unimpeded across the EU for three years without paying any penny of tax.According to preliminary estimates, the cumulative value of the items involved could be as much as 430 million euros between 2022 and 2024, and behind this string of figures is a serious erosion of the EU's financial foundation.
At the sensitive juncture of the new VAT regulation in Italy, the "Dragone" action is like a heavy hammer. "This tax evasion scheme, which exploits complex corporate structures and loopholes in EU internal market rules, has become a Damocles sword over the EU's fiscal security," the presiding prosecutor, Marco De Luca, said in a statement.
Marco, a tax authority at Milan's Bocconi University, further analyzed that Bulgaria and Hungary, as logistics hubs in Eastern Europe, had long been plagued by a grey operation of "clearance - sale" separation. In 2023 alone, the VAT gap in the textile industry in northern Italy soared to 870 million euros, of which Chinese goods accounted for more than 60%, which is an eye-popping data.
A head of a Chinese logistics company in Rome is struggling to cope with the rocketing rate of customs inspections in Italy since 2024. It has soared from 5% to 22%, customs clearance time has increased from the previous three days to an average of 15 days today, and inspection requirements are strict, with procurement contracts, payment certificates and domestic VAT invoices required to be "one document, one without another."
Under these pressures, the supply chain is also quietly reinventing. In order to survive, some sellers have turned to the mode of "EU overseas warehouse + DDP tax package," and the cost of material flow has risen, up to 18% -25%; The leading cross-border companies are even more proactive and have begun to invest heavily in laying down localized tax teams in Europe. A cross-border e-commerce listed company's earnings report showed that tax compliance spending surged by 370% year-on-year in 2024, a series of changes that indicate that the industry is at a crossroads of great change.
More alarming is the fact that the "intra-EU flow + fake invoices" modus operandi of the companies involved is twin-like to the German "solar panel VAT scam" in 2023, which undoubtedly raises an urgent alarm bell for pan-European tax regulatory collaboration.
Industry veterans strongly cautioned that although this "Dragone action" did not directly target Chinese producers, the "last mile" of cross-border trade - compliance - must not be underestimated. At present, the VAT tax rate in the EU is uneven, as it is as high as 22% in Italy and 20% in Bulgaria, and the abuse of deferred procedures, the wanton registration of shell companies and other chaos have become the focus of tax inspections.
As of January 2025, the EU's new electronic invoice system will be mandatory, requiring cross-border transactions to be accompanied by traceable information on the HS code of the goods. This is undoubtedly putting tighter "chains" on illegal operations and further compressing the gray space. At present, the companies involved are still deeply entangled in the mire of judicial investigations. Although 17 suspects have applied for bail, the future direction of the industry is already clear.
As the EU's "Tax Digitalization 2025" plan moves forward, those who try to rely on "gray means" to fish in troubled waters in cross-border trade will be eliminated by the times, and brand sellers with full-chain compliance capabilities are expected to stand out in the new round of industry reshuffle and become the biggest winners.
For the e-commerce trade in Central Europe with an annual scale of more than 450 billion euros, the "Dragone Action" is a wake-up call. It is not just about fines and imprisonment, but also about the life and death decision of the whole industry to move towards compliance transformation. Every cross-border practitioner should clearly realize that the path of compliance is the only way to long-term development.
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