Guilt by Association
In Orwell’s “Nineteen Eighty-Four,” there exists the concept of thoughtcrime—an offense requiring no action, only the wrong mental attitude. Winston Smith is ultimately condemned not for what he did but for what he thought. For being near the wrong people. For failing to report what he should have suspected.
In the Polish tax system, there exists an equivalent of thoughtcrime: participation in a VAT carousel, and the denial of input VAT deduction as an instrument of collective punishment.
You need not know you are participating in fraud. You need not derive any benefit from it. You need not even understand what a carousel is. It is enough that you purchased goods from an entity that—as it later emerges—was a link in a chain. It is enough that somewhere at the beginning of that chain, someone failed to pay tax.
And suddenly you are guilty. You must prove you did not know. You pay for all of it.
Orwell described totalitarianism as a system in which guilt is independent of action. The Polish tax system is not totalitarian—but this one mechanism operates identically.
Anatomy of the Carousel
To understand the trap, one must understand the machine.
VAT carousel fraud exploits a gap in the architecture of the European tax system. When goods cross a border between EU member states, the transaction is taxed at zero rate. The buyer pays no VAT to the seller—he accounts for it himself, in his own country.
This was an elegant solution, devised in 1993 to avoid complicating intra-Community trade. The problem is that it created a fissure—and through that fissure flow billions.
The scheme is simple. Company A in Germany sells goods to Company B in Poland—without VAT, because it is an intra-Community transaction. Company B sells to Company C—with VAT. Company C sells to Company D, D sells to E, E exports back to Germany—at zero rate, but with the right to a refund of the VAT paid earlier in the chain.
Except that Company B—the first one in Poland—never remits the VAT it collected from C. It vanishes. It is a “missing trader.” And all the VAT that flowed through the chain is fraudulently extracted.
The goods may circulate in a loop—hence the name “carousel.” The same phones, the same electronics, the same fuels—moved between countries solely to generate fictitious liabilities and fictitious refunds.
The Perfect Crime—for the Criminals
The genius of the carousel lies in the fact that the real criminals are nearly untouchable.
The missing trader is typically a shell company—registered to a person without assets, existing for a few months, conducting business only on paper. By the time the tax authority starts asking questions, the company no longer exists. The person listed as owner is either dead, homeless, or claims to have signed documents in exchange for a bottle of vodka.
The actual organizers are several layers removed. They operate from safe jurisdictions. They have lawyers, accountants, corporate structures designed so that the trail goes cold.
So whom does the tax authority catch?
It catches companies that are in the chain but are not its architects. Companies that bought goods because the price was attractive. Companies that sold goods because there was demand. Companies that did not know—or had no basis to know—that somewhere at the beginning of the chain, someone was committing fraud.
These companies have addresses. They have assets. They have bank accounts that can be frozen. And they have owners whose names can be attached to charges.
Thoughtcrime: You Should Have Known
Orwell describes in “Nineteen Eighty-Four” a mode of thinking he calls “crimestop”—the ability not to see what should not be seen, not to know where knowledge is dangerous.
The Polish tax authority expects the opposite: foresight. You should have known. You should have anticipated that your counterparty might be unreliable. You should have verified—not just him, but his suppliers, and their suppliers.
This is called “due diligence.” A concept that sounds reasonable until you see what it actually requires.
Did you verify that the counterparty is registered as a VAT taxpayer? Did you check whether he has an office at the address he provided? Did you examine his financial history? Did you analyze the supply chain to ensure the goods did not originate from a suspicious source?
The Court of Justice of the European Union has repeatedly ruled that a trader cannot be required to conduct verification as thorough as that performed by tax authorities. That a taxpayer is not a law-enforcement agency. That he has no obligation to investigate his own counterparties.
Polish practice ignores these rulings.
The result is a standard impossible to meet. If you did not check, you were careless. If you checked but found nothing, you did not check enough. If you checked, found something, and continued trading anyway, you acted with knowledge.
Tax Doublethink
Orwell describes doublethink as the capacity to hold two contradictory truths simultaneously. The tax system demands similar mental gymnastics.
On one hand: you have the right to deduct VAT. This is not a favor—it is a structural element of the tax. Without the right to deduction, VAT would not be a value-added tax but a turnover tax, cascading at every stage.
On the other hand: you may lose this right if somewhere in the chain—perhaps five transactions earlier, in a company you never heard of—someone committed fraud.
On one hand: the presumption of innocence is a foundation of the rule of law.
On the other hand: in a carousel case, you must prove you did not know. The burden of proof is reversed.
On one hand: an entrepreneur is supposed to conduct business, not investigations.
On the other hand: if you do not conduct investigations, you have failed to exercise due diligence.
To function in this system, you must simultaneously believe in your rights and know they can be taken away. You must trust counterparties and suspect everyone. You must be innocent and prepared to prove your innocence.
This is doublethink in practice.
The Ministry of Truth Reinterprets the Past
In “Nineteen Eighty-Four,” the Ministry of Truth is engaged in falsifying the past—altering archives so that the present appears a logical consequence of what came before.
In VAT carousel cases, something similar occurs. Transactions that were legal, routine, documented at the time they were entered into are retrospectively reclassified as criminal.
Five years ago, you purchased goods from a counterparty. You verified him—he was registered, had an office, paid taxes. The transaction passed without objection. You accounted for VAT, deducted VAT, case closed.
Now you learn that this company—which no longer exists—was a link in a carousel. That your transaction from five years ago is evidence of participation in fraud. That the VAT you deducted must be repaid. With interest. Plus a penalty. Plus, perhaps, criminal charges.
The past has been changed. What was legal has become a crime. What was diligent has become negligent.
And no one can explain what you should have done differently—because by the standards of that time, you did everything right. But the standards have changed. Retrospectively.
Big Brother’s Statistics
In 2023, 1,188 bank accounts were seized in connection with suspected VAT fraud—more than twice as many as in 2019. Frozen funds amounted to 88.5 million złotys. In 2024, over 3,700 preparatory proceedings were initiated concerning VAT offenses.
These numbers sound like success. They are presented as success. The system is fighting fraudsters, results are improving, the budget is being protected.
But behind each of these numbers stand actual companies. Actual bank accounts—frozen, inaccessible, making it impossible to conduct business. Actual people—suspects, interrogated, living in uncertainty.
How many of these companies are the real carousel organizers? And how many are entrepreneurs who found themselves in the wrong part of the chain?
The system does not distinguish. The system produces statistics.
Orwell wrote that in Oceania, boot production increases every year, though half the population goes barefoot. Statistics serve power, not truth.
How to Survive
There is no way to entirely eliminate the risk of being drawn into a carousel. As long as the system operates as it does, every transaction carries potential danger.
But the risk can be minimized.
Due diligence—though the standard is absurdly high—is a line of defense. Documentation of counterparty verification. Compliance procedures. A decision trail showing you made the effort.
This does not guarantee you will not be accused. But it changes the character of the case. It changes the position from which you defend yourself.
And when the accusation comes—and it may come to anyone—you need someone who understands the mechanism. Who knows the CJEU case law holding that the reversed burden of proof has its limits. Who can demonstrate that you were an honest entrepreneur in a dishonest system.
How We Can Help
We represent entrepreneurs accused of participation in VAT carousels. At every stage—from the first notice of inspection, through tax proceedings, to court disputes and criminal cases.
We analyze transaction chains. We challenge the attribution of liability. We invoke European case law that protects honest taxpayers from responsibility for others’ fraud.
We appeal seizure decisions and account freezes—because freezing an account is often punishment before verdict.
We help build due-diligence procedures—not because the standard is fair, but because in this system it is the only defense.
We fight for people who found themselves on the wrong side of a statistic.
A Final Thought
Winston Smith was broken not because he was guilty but because the system could define guilt however it wished.
The Polish tax system is not totalitarianism. But the mechanism of liability for VAT carousel fraud operates according to similar logic: you can be innocent in every sensible meaning of the word—and still be punished.
The difference is that you can defend yourself. You can know your rights. You can have someone on your side.
Orwell did not give his protagonist that option.
You have it.
