The payment of duties is also circumvented in many ways, including illegal shipment or smuggling. The losses to local or national governments by tax subterfuges, illegal business, or recordkeeping, and by the various other methods of avoiding payment is significant, and as a result penalties are severe. Avoidance also hurts the private sector of the economy when taxes and duties relating to imports are circumvented, to the extent that such taxes and duties are protectionist and are designed to discourage a high level of importation of a commodity or product. Finally, governments which themselves may be taxed or proportionally assessed, for example, for their share of international costs of projects, or international organizational budgets, may also seek avoidance in the form of truant payments or defaults.
In 1998, frauders targeted mobile phones in nearly all EU countries. A criminal organization bought and sold these phones without paying VAT, which resulted in a loss of some 100 million euros. Coordinated action of the European Commission and the UK, Belgian, Danish, German and Spanish authorities led to the arrest of 10 persons. Large sums of money as well as numerous mobile phones were seized at the same time.