Recently, the State Administration of Taxation exposed four illegal cases of fraudulent export tax refunds. One of the major cross-border tax fraud cases involved a total amount of up to 200 million yuan, which attracted great attention in the cross-border e-commerce industry.
This tax audit storm not only cut off many gray chains of tax fraud, but also prompted the industry to deeply reflect on the importance of tax compliance.
1. Details of the Extraordinary Tax Fraud Case
Three Tianjin cross-border companies with Yang Moumou as the actual controller, between 2020 and 2022, by signing false sales contracts, purchasing customs declaration information for export goods from others, and accepting false VAT special invoices from upstream companies, they forged export business scenarios at every level, and defrauded the national export tax refund of more than 200 million yuan in total.
At present, six people involved, including Yang Moumou, have been prosecuted in accordance with the law and face severe legal sanctions.
The core flaw in the case lies in the abnormal capital return chain.
After receiving the “payment” transferred from overseas, the company involved in the case transferred all funds to the account of the upstream invoicing company on the same day. However, these funds were not used for production and operations, but were quickly transferred to the personal accounts of the persons involved.
This fund flow pattern of “same day in, same day out” and all transferred to personal accounts has become a key clue for the task force to solve the case.
2. Tax fraud cases in many places
Different characteristics
In addition to the major cases in Tianjin, different types of tax fraud cases have also been exposed in Heilongjiang, Zunyi, Guizhou, Chongqing and other places, sounding the alarm for the cross-border e-commerce industry.
The Heilongjiang case shows the characteristics of “scale and chain”. Seven companies controlled by Liu Jingwei operate in a coordinated manner. The chain involved in the case is long and involves many subjects.
In the end, under the coordinated attack of multiple departments of taxation and public security, the principal culprit was sentenced in accordance with the law.
In the Guizhou Zunyi case, Chishui Huidafeng Trading Co., Ltd. used the method of “low value, high declaration, false declaration” to fabricate low-priced goods as high-value export goods, defraud customs declaration data, and exaggerate the tax refund base.
This type of violation is common and typical in the cross-border e-commerce industry. Taking advantage of the large price fluctuations of commodity categories to implement operations may seem like a simple process and quick short-term profits, but in fact it is extremely risky.
In the Chongqing case, Hongyi Bioengineering, as a high-tech enterprise, relied on the public’s trust in high-tech industries to cover up the nature of false transactions and defrauded the state of tax refund funds by fabricating cross-border services or technology transfer businesses.
3. Industry underreporting and profit-driven chaos
In the cross-border e-commerce industry, underreporting of goods value and tax fraud are serious problems.
According to industry insiders, in addition to listed companies that may declare truthfully as required, more than 80% of companies have underreported, and this occurs in multiple links of export and import.
There are various methods of under-reporting, including reporting high-value goods as low-value, reporting taxed categories as non-taxable categories, etc.
In terms of profit-driven aspects, logistics companies are the main beneficiaries of under-reporting. They pocket the price difference by evading taxes and fees, and seize the market by attracting goods at low prices.
However, this behavior not only harms national interests, but also destroys the fair competition environment in the market.
4. Crack down on tax fraud and promote industry transformation
Although the exposure of the four cases has shocked the industry, it is a good thing in the long run.
Many sellers said that the country’s intensified crackdown will help purify the market environment, allowing compliant sellers to win the market based on product quality and service levels, rather than relying on opportunism.
In terms of punishment, the companies involved were required to repay the fraudulent export tax refunds in accordance with the law, and some companies were stopped from processing export tax refunds. The persons involved were held criminally responsible in accordance with the law and could face penalties of up to life imprisonment.
In terms of industry trends, with the improvement of the regulatory system and the improvement of the accuracy of tax supervision, illegal methods such as false settlement of foreign exchange and under-reporting of high values will be severely cracked down.
More and more cross-border sellers are beginning to realize the importance of tax compliance and hire professional tax consultants to conduct export business audits to ensure that every document and every fund is traceable and verifiable.
This crackdown on tax fraud is essentially forcing cross-border industries to get rid of “price involution” and transform into “value competition”.
Cross-border e-commerce exports have become an important engine for foreign trade growth, but the irregularities accumulated in the early stage of the barbaric growth need to be resolved urgently.
Regulatory upgrades are an important measure to promote high-quality development of the industry and remind all cross-border enterprises: the bottom line of compliance will never change.
