Police hold 20 suspects in false VAT invoice case
Shanghai police have cracked a false invoice case involving 4.4 billion yuan (US$717.8 million) and thousands of companies nationwide.
Police said yesterday that they had arrested more than 20 suspects alleged to have registered and acquired more than 70 shell corporations in Shanghai since 2011 to issue false value added tax invoices to nearly 6,000 companies.
A shell corporation serves as a vehicle for business transactions without itself having any significant assets or operations.
The suspects bought 4.1 billion yuan VAT invoices from 1,400 companies at between 3 to 4 percent of the invoice value and sold them on at higher prices.
Companies could pay less tax by purchasing false invoices, but such criminal behavior seriously distorted the tax system and adversely affected the government’s fiscal revenue, police said.
The invoices, mainly for oil or electric equipment, were sold for a wider range of goods including clothing, said Huan Changfeng, a chief investigator at the Shanghai Public Security Bureau’s economic crimes unit.
If found guilty, the suspects could face life imprisonment.
Police said they had spent three months tracking the suspects and caught them on July 16 with the assistance of police in neighboring Zhejiang Province.
Guan Wenji, an official with the Shanghai tax bureau, said false invoices became a serious problem last year as companies began to take advantage of a VAT pilot reform initiated in the city.
The program replaced business tax with VAT for transport companies and some service providers from January 2012. The VAT system was considered fairer as the tax was levied only on revenue created by a company, while the previous scheme levied tax on a business’s gross revenues.
VAT invoices allowed companies to claim VAT credits, leading to reduced tax.
In the first five months of this year, the VAT reform eased the tax burden by 40.6 billion yuan for 1.29 million businesses in the pilot regions, according to the State Administration of Taxation.
The reform expanded from Shanghai last August to encompass 11 regions, including the cities of Beijing, Tianjin and Shenzhen. It is set to be rolled out nationwide today.
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