The Chinese mafia is global and always pitches a tent where work can be done discreetly. As a logistics centre for Chinese criminal groups, Hungary’s underbelly is warm and soft.
Carousel fraudsters do a lot of harm. Goods which evade the customs and excise radar put Hungarian products—fashion, leather, cigarettes and alcohol among others—at a competitive disadvantage. Above-board retailers cannot hope to compete with the black market. The state loses billions of forints in revenues while Hungarian firms and labour are squeezed out of the market. The advantage for lowincome consumers with access to cheap Chinese products is dwarfed by the damage done to the economy as a whole. Lost revenue is one thing, outright theft another: carousel fraudsters also cream off taxes paid by others by reclaiming phantom value-added taxes.
Budapest’s tenth district is home to a huge warehouse quarter. Many wholesalers there are Chinese. Footwear is displayed in neat rows, but instead of going by the pair they are sold by the container. In a dawn raid on July 28, customs police smoked out three gangs from the Far East dealing in clothing and household goods. The action was part of a synchronised operation at 64 locations nationwide involving 210 officers. Tax offences totalled HUF 4.8 billion, or around I18 million.

The damage was not only financial: one unlucky excise official was bitten by a Chinese trader.
The criminals did not manage to destroy the invoices in a septic tank: this time they did not have any time to, and were caught red-handed. Since 2006, the three gangs nailed had been trading goods without paying VAT using falsified documents. In spite of making billions of forints, they were out to save money where they could: customs officers were amazed to see one Chinese security guard putting out pigeon traps for meat.
Some years ago the Hungarian branch of a German multinational was beset by a scam in which the identities of homeless people were bought for a few thousand forints. Their names were used to establish shell companies for the purpose of transferring huge sums of money. The same trick was repeated with a dash of the member states—an amount roughly equal to Hungary’s total gross domestic product.
Goods must be as pricey as possible when leaving the country to maximise reclaimed VAT but cheap on the way in so as to keep custom taxes low. The fraud usually involves at least three participant and occasionally innocent companies— an exporter, an importer and at least one, but sometimes 8–10, traders in each country.