Huang Wei evaded a huge amount of tax, why not go to jail?

Huang Wei evaded a huge amount of tax, why not go to jail?

—— Corporate criminal compliance

Liu Fangyong Liu Jianqing Jiangxi Zhiqiao Law Firm

【Case】

Recently, the tax department of Hangzhou City, Zhejiang Province, after investigation, found that network anchor Huang Wei (net name: Wei Ya) between 2019 and 2020, through the establishment of a number of sole proprietorships and partnership enterprises such as Shanghai Weihe Enterprise Management Consulting Center and Shanghai Dusu Enterprise Management Consulting Partnership, converted the income from labor remuneration such as commissions and pit fees obtained by his personal engaging in live streaming into business income, made false declarations to evade taxes, and engaged in other production and operation activities to obtain income. 643 million yuan of taxes were evaded by failing to declare and pay taxes in accordance with the law, and 0.6 billion yuan of underpayment of taxes. In the process of tax investigation, Huang Wei paid 500 million yuan in taxes and took the initiative to report tax-related violations that the tax authorities had not yet mastered. Accordingly, the Inspection Bureau of the Hangzhou Municipal Taxation Bureau has sent Huang Wei a decision on tax administrative treatment penalties in accordance with the law, and huang Wei has been charged a total of 1.341 billion yuan in taxes, additional late fees and fines. However, the relevant judicial organs have not been seen to pursue Huang Wei's criminal responsibility.

Q: Huang Wei evaded such a huge amount of tax, why not go to jail?

【Analysis】

According to Article 201 of the Criminal Law of the People's Republic of China, as long as the perpetrator voluntarily accepts the administrative punishment of the tax authority, pays the tax payable, and pays late fees, the perpetrator will not be investigated for criminal liability for the first tax evasion. In this case, Huang Wei failed to declare and pay taxes in accordance with the law through the so-called "tax planning"; she committed tax evasion, and the amount was huge. However, since Huang Wei was a first-time offender and at the same time took the initiative to pay taxes and late fees, it was legally based on not being held criminally responsible.

If Huang Wei fails to pay taxes, late fees and fines within the prescribed time limit; if Huang Wei has received criminal penalties for evading the payment of taxes within five years, or has been given two or more administrative penalties by the tax authorities; what awaits her is imprisonment.

【Compliance Advice】

I. Strengthen awareness of paying taxes in accordance with law

Paying taxes according to law is a legal obligation of every citizen and enterprise. Any industry and field must strictly comply with the tax law and consciously pay taxes according to law. Restoring the legal net without omission and cracking down all kinds of tax evasion is an inevitable choice for modern countries to safeguard the authority of the tax law and promote social fairness and justice. No one should take any chances in this regard.

Second, be cautious about tax planning

In recent years, many intermediary institutions have carried out so-called "tax planning" for enterprises and individuals under the banner of tax avoidance in accordance with the law out of commercial interests. As everyone knows, in the current era of big data with a highly developed network, many tax planning schemes are suspected of tax evasion and tax evasion, and some have even seriously violated the national criminal law and tax law to constitute a crime. Therefore, businesses and individuals must be cautious when implementing tax planning.

【Legal Link】

Criminal Law of the People's Republic of China

Article 201 [Crimes of Tax Evasion] Where a taxpayer uses deception or concealment to make false tax declarations or fails to make declarations, and evades the payment of a relatively large amount of tax and accounts for more than 10 percent of the tax payable, he shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention and shall also be fined;

Where the withholding agent adopts the means listed in the preceding paragraph and fails to pay or underpays the withheld or collected taxes, and the amount is relatively large, it shall be punished in accordance with the provisions of the preceding paragraph.

Where the acts mentioned in the preceding two paragraphs are repeatedly committed and are not dealt with, they shall be calculated on the basis of the cumulative amount.

Where there is an act mentioned in the first paragraph, after the taxation authority has issued a notice of recovery in accordance with law, the tax payable shall be paid in return, the late payment fee shall be paid, and the administrative punishment has already been imposed, criminal responsibility shall not be pursued; however, except for those who have received criminal punishment for evading the payment of taxes within five years or have been given two or more administrative punishments by the tax authorities.

Law of the People's Republic of China on the Administration of Tax Collection

Article 63 stipulates that a taxpayer who forges, alters, conceals, or destroys account books or accounting vouchers without authorization, or lists multiple expenditures or omits or under-lists income in the account books, or refuses to declare or makes false tax declarations after being notified by the tax authorities, and fails to pay or underpays the tax payable, is tax evasion. Where a taxpayer evades taxes, the taxation authorities shall pursue the taxes or late fees that he has not paid or underpaid, and shall also impose a fine of not less than 50 percent but not more than five times the tax that he has not paid or underpaid;

Individual Income Tax Law of the People's Republic of China

Article 8 stipulates that in any of the following circumstances, the tax authorities have the right to make tax adjustments in accordance with reasonable methods: (1) the business transactions between individuals and their related parties do not conform to the principle of independent transactions and reduce the amount of tax payable by themselves or their related parties without justifiable reasons; (2) enterprises controlled by resident individuals, or jointly controlled by resident individuals and resident enterprises, established in countries (regions) where the actual tax burden is significantly low, do not have reasonable business needs, and do not distribute or reduce the profits that should be attributable to resident individuals ;(3) Individuals who implement other arrangements that do not have a reasonable commercial purpose and obtain improper tax benefits. Where the taxation authorities make tax adjustments in accordance with the provisions of the preceding paragraph and need to make up the tax payments, they shall make up the tax payments and collect additional interest in accordance with law.

Administrative Punishment Law of the People's Republic of China

Article 32 provides that a party shall have a mitigated or mitigated administrative punishment in any of the following circumstances: (1) Taking the initiative to eliminate or mitigate the harmful consequences of the illegal conduct; (2) being coerced or lured into carrying out the illegal conduct by others; (3) voluntarily confessing to the illegal conduct that the administrative organ has not yet grasped; (4) cooperating with the administrative organ in investigating and handling the illegal conduct and having meritorious performance; (5) Where laws, regulations, or rules provide that other administrative punishments should be mitigated or mitigated.