"The three Britons were arrested on 29 December in Tournai," said Jean-Bertrand Cambier, a prosecutor in the western city, as part of an investigation into some three million euros (4.3 million dollars) of unpaid taxes.

Cambier said the group were in the country "probably trying to unblock the situation" after accounts through which suspect sums were transited were frozen several weeks ago.

Polluting permits for businesses were launched in the European Union in 2005 as part of Brussels' efforts to reduce emissions of harmful gases blamed by scientists for global warming.

But the absence of harmonised tax and VAT regimes across EU member states creates scope for such fraud, Cambier said.

With Britain not applying VAT to such purchases, money due to Belgian authorities, where the rate is 21 percent, remains unpaid after staged transactions, the prosecutors say.

The trio had set up a company in Tournai to market permits bought in Britain over a period of "several months" with Cambier saying transactions amounted to an estimated "three million euros".

The trio, placed in detention, deny fraud allegations, but have been charged with criminal conspiracy, money-laundering and making false declarations.

The European Commission in September proposed a bloc-wide exoneration of VAT charges on such CO2 quotas. Belgium adopted a zero percent rate on January 1.

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