Tax case fax: tracing the "cut off" funds and tearing off the disguise of tax fraud

Track down the "cut off" funds and tear off the disguise of tax fraud

Author: Liu Jie, reporter Zheng Guoyong, Cheng Lihua

In the process of fund verification, the case-handling personnel found that a large number of "withdrawals" occurred in the relevant accounts involved in the case, which made a large number of "breakpoints" in the flow of funds between the enterprises involved in the case and the upstream enterprises, so the task force could not continue to verify the direction of the funds of the two parties in depth, and the investigation reached a deadlock......

Recently, the Second Inspection Bureau of the Dalian Municipal Taxation Bureau of the State Administration of Taxation cooperated with the police to successfully crack the case of L Garment Co., Ltd. (hereinafter referred to as L Company) and Y Garment Co., Ltd. (hereinafter referred to as Y Company) for fraudulent export tax rebates in four months.

After investigation, the police and taxation joint task force confirmed that the person involved in the case, Zhang and others, controlled two enterprises, L company and Y company, and in the absence of real transactions, fabricated fur purchase and sales business, falsely issued input invoices involving an amount of 85.91 million yuan, falsely declared export sales of 88.07 million yuan, and defrauded the state of export tax rebates of 10.32 million yuan. At present, 10 criminal suspects involved in the case, including Zhang, Wang and Li, have been arrested, and the tax authorities have recovered the tax fraud funds of the enterprises involved in the case in accordance with the law. The case has been transferred to the judicial authorities for trial.

Unexpected findings in suspicion analysis

In April 2023, the Second Inspection Bureau of the Dalian Municipal Taxation Bureau received a case source information from the superior: Company L's export business activities showed an abnormal situation of "customs declaration in different places and two ends abroad", and it was suspected of fraudulent export tax rebates, and the superior requested the Second Inspection Bureau of the Dalian Municipal Taxation Bureau to verify it.

After receiving the clues, the bureau immediately organized personnel to set up an inspection team. The inspectors analyzed the tax registration information of Company L in detail. They found that Company L was established at the end of 2020, the nature of the enterprise is a private limited liability company, it is a general taxpayer of value-added tax, the legal representative is Wang, and the company is mainly engaged in fur products processing business. In more than two years from its establishment to April 2023, the company's export sales have accumulated 42.84 million yuan, and it has applied for a tax refund of 5.074 million yuan from the tax authorities.

From the perspective of the business model of the enterprise, its main business chain is: from the trading companies in the surrounding counties and districts of Tangshan City, Hebei Province, to purchase raccoon dog skin, fox skin (cooked skin) and other raw materials, in Dalian processing into wool tops, hairballs and other goods, and then through the customs broker in Weihai, Shandong, in the local customs to South Korea. For the sake of cost savings, enterprises that process goods in Dalian generally export goods from Dalian Customs to South Korea nearby, and the company is willing to transport the goods to Weihai, Shandong Province for export, which is not in line with common sense.

There are also many doubts about the company's input invoice data: the fur trading companies upstream of Company L were established at a similar time, and their registered places are all counties and districts around Tangshan City, and nearly half of the enterprises have been in abnormal operation or cancellation status. Judging from the operational information, these upstream companies purchase raw hides from self-employed households and sell cooked hides to Company L. However, the process from raw to cooked skin needs to be treated with chemicals, but none of these upstream companies have obtained any indication of invoices for chemical reagents, nor have they commissioned production and processing and other expenditures. At the same time, the inspectors also found that in the process of production and operation of Company L for more than two years, the electricity expenditure was only 8,400 yuan, and the water bill was only 379 yuan, and its water and electricity expenditure did not match the data of 42.84 million yuan in export sales.

In the process of analyzing the data of the upstream enterprise of Company L, the inspectors accidentally found that the upstream enterprise had also issued a lot of invoices for another company named Company Y.

The inspectors immediately conducted a correlation analysis of Company Y, and they found that the tax personnel of Company Y and Company L were both Huang, and the legal representative of Company Y, Mr. Wang, and Mr. Wang, the legal representative of Company L, were sisters. In addition, Company Y is similar to Company L in terms of establishment time and business content, and the timing of the application for export tax rebate by the two companies is completely the same, as well as the information of the customs broker, customs, destination and other information of the export. Company Y's export sales for more than two years were 46.07 million yuan, and a total of 5.246 million yuan was applied for tax rebates.

After comprehensively studying and judging the business data and tax-related information of the enterprise, the inspectors believe that the business of Company L and Company Y is similar, the upstream suppliers are suspicious, and the personnel of the enterprise are related, and there is a major suspicion of export tax fraud committed by a gang. In order to strengthen the crackdown force and quickly investigate and handle the case, the Second Inspection Bureau of the Dalian Municipal Taxation Bureau handed over the clues of the case to the police, and the tax police set up a joint task force to jointly investigate the enterprises involved.

Break through the "breakpoint" and discover the "undercurrent"

In view of the fact that the registered addresses of the two enterprises involved in the case were in the same area, the task force decided to first conduct an on-the-spot investigation of Company L and Company Y to verify whether their production and operation activities were false.

After inspecting the registered addresses of the two enterprises on the spot, the case-handling personnel found that the two addresses did not meet the office conditions of the enterprises at all. In the process of verification, the case-handling personnel found a place suspected to be the production workshop of the two companies according to the clue of the remarks of the water and electricity invoice of Company L and Company Y. However, after on-site inspection, it was found that this was the ordinary garment processing and production workshop of another company. There was no fur stock on site, no fur scraps were found, and no signs of fur production and processing were found.

The results of the inspection showed that Company L and Company Y had never produced or processed any fur products for export there. These on-the-spot investigations confirmed that the two enterprises involved in the case had no production and processing site and capacity at all, and that their business behavior of purchasing thousands of furs for production and processing during the inspection period was non-existent.

If the purchase and sale business between the enterprise involved in the case and the upstream enterprise is false, then there must be no real capital exchange between the upstream and downstream enterprises. In order to further collect evidence of false illegal business between the two enterprises and the upstream enterprises, the task force decided to carry out targeted verification of the bank accounts of the two enterprises, the upstream enterprises, and relevant personnel.

After tracking and analyzing the data of a large number of capital transactions of the enterprises, the case-handling personnel found that after the two enterprises involved in the case paid the "payment" to the upstream enterprises, the upstream enterprises would quickly transfer the money to their personal accounts each time, and then the funds would be transferred to another personal account and withdrawn by the payee at the bank outlets.

A large number of "withdrawals" occurred in the middle of the capital flow between the two sides, causing a "breakpoint" in the capital flow between the enterprises involved in the case and the upstream enterprises. As a result, the investigators were unable to continue to track the direction of the funds, and the verification was temporarily blocked.

How will the investigation proceed next?

To this end, the special case group convened a meeting to analyze the case. The case-handling personnel believe that some cases of false openings investigated and handled in recent years show that in order to allow the rapid circulation of limited funds, and to "pretend" as much as possible that the flow of funds is consistent with the flow of tickets, some enterprises involved in false openings have had cases where the personnel involved in the case have withdrawn funds and then deposited cash into the accounts of other persons involved in the case, so as to achieve the goal of creating suspicions.

After discussing and analyzing the facts of the case, the task force decided to implement the tactic of "matching the case": on the basis of expanding the verification of the bank accounts of all enterprises and personnel involved in the case, and taking the cash deposit and withdrawal time of the relevant accounts as the key indicator, the more than 300 bank accounts involved in the case were analyzed and tracked, looking for bank accounts and personnel that matched the "breakpoint" withdrawal behavior of funds, in terms of time, deposit amount, etc., and looking for clues of abnormal situations such as the return of funds.

Hard work pays off. By tracking the movements of a large number of personal accounts at the same time node, the case-handling personnel found that after the "payment" funds were withdrawn, within a few hours, they would soon appear in another personal account in the form of cash, and then after a transfer of personal accounts, they would eventually be transferred to the accounts of the legal representatives of Company L and Company Y without exception, and finally realize the return of funds.

The repatriation of funds confirms the judgment of the case-handling personnel. After combing and tracking, there were a total of 48 capital repatriations between the enterprises involved in the case and the upstream enterprises, involving an amount of nearly 40 million yuan. In this process, the task force confirmed through technical investigation technology that Li and other three people were the core personnel who manipulated upstream enterprises to make false openings. In addition, through the verification of the capital flow of the two enterprises and the flow of export tax rebate funds, a person named Zhang surfaced - the exchange of funds in his account and the correspondence with Wang and others showed that this Zhang was not only a relative of Wang, but also may be the core personnel in the export tax rebate "drama" of the two enterprises involved in the case.

Graft export scam

After obtaining false evidence of the false purchase, sale and payment business of the enterprises involved in the case and the upstream raw material supply enterprises, the special case team followed the business procedures of the enterprises and subsequently verified the flow of goods of the two export enterprises involved in the case.

After analyzing the information of the invoices for the purchase and sale of goods and transportation of the two export enterprises involved in the case, the case-handling personnel found that the trucks with the remarks on the invoices had never come to Dalian. Therefore, the task force conducted an investigation into the two logistics companies involved, and found evidence of the logistics company's sale of invoices to the two export companies involved in the case from the communication information of the enterprise personnel. In this case, the personnel of the logistics company had to admit the illegal fact of collecting invoicing fees and issuing false transportation invoices to the two export companies.

The task force believes that in order to verify whether the two enterprises involved in the case have illegal export tax fraud, it is necessary to complete the verification of the two links before and after: the front-end enterprises involved in the case have false VAT invoices, and the back-end enterprises have false export behaviors. Only in this way can the chain of evidence in the case be unassailable.

As a result, the special case group intensified the verification of the export business of the enterprises involved in the case. Combined with the uniqueness of the "freight container number" of export goods, the container information was extracted from the 104 ocean bills of lading information of the two export enterprises involved in the case, and the customs declaration information of the enterprises was compared and investigated with the relevant information of the overseas goods buyers. Sure enough, it was discovered that the real owners of the exported goods were not Company L and Company Y. At the same time, after investigation, the task force confirmed that the real owner of the export goods had never engaged in the supply and marketing of goods with the two enterprises involved in the case, and there was no entrusted production relationship.

The results of the verification confirmed that the two enterprises involved in the case used the information of other people's export goods to make false customs declaration documents and fraudulently obtain export tax rebates.

With the deepening of the investigation, the illegal facts of the two companies involved in the case, such as fictitious procurement business, false invoicing, and false export, have completely surfaced.

After meticulous control, the special case group divided its troops into multiple routes according to the plan, and carried out a unified net collection and arrest operation in Dalian City, Changli County, Gucheng County, Lixian County, and other cities in Hebei Province, and 10 criminal suspects involved in the case, including Zhang, Wang, and Li, were all arrested. In the face of all kinds of detailed evidence presented by the task force, Zhang and others confessed to the illegal facts of false invoicing and fraudulent export tax rebates.

After investigation, from 2020 to 2023, the two import and export enterprises involved in the case fabricated procurement business and accepted a total of 85.91 million yuan of false input invoices issued by upstream enterprises. At the same time, the export information of goods that do not handle export tax rebates was used to forge export declaration forms and other materials, and a total of 10.32 million yuan of export tax rebates were defrauded from the state. At present, the case has been transferred to the judicial department for trial.

Keep an eye on the key elements to identify export scams

Author: Zhang Ming, Director of the Second Inspection Bureau of Dalian Taxation Bureau of the State Administration of Taxation

■Tax case analysis

This is a typical case of illegal and criminal cases of garment enterprises "paying bills and matching tickets" to defraud export tax rebates. In the absence of real purchase and sales business, the enterprises involved in the case fabricated production and operation chains, created false appearances of export sales, and defrauded the state of export tax rebates.

In the process of investigating and handling this case, the special case team took the verification of the false opening of the upstream enterprise as the starting point, and confirmed that the enterprise had accepted false invoices by verifying the production and operation sites of the enterprises involved in the case, tracking the flow of funds and goods, and then following the clues of export shipments, tracing the real owner of the goods, and uncovering the false export camouflage of the enterprises involved in the case. Through a series of rapid and meticulous investigation activities, not only a complete chain of evidence is constructed, but also the case is quickly investigated and handled, and the chain of violations is quickly cut off. The investigation and handling of this case provides a reference for the tax authorities to prevent and curb such illegal export tax fraud activities.

Intensify the verification of the operation of production-oriented export enterprises. In view of the illegal methods shown in this case, the tax authorities should strengthen the verification of the authenticity of the production of garment processing enterprises such as fur in their daily collection and management, especially for enterprises with abnormal characteristics such as "buying and selling at both ends" and "customs declaration in other places". After receiving the application for export tax rebate from an enterprise, the tax authorities shall verify its production site, operation status, production, supply and marketing information, etc., and verify whether the plant area, equipment, production personnel, and water and electricity consumption are consistent with its declared production capacity, so as to prevent criminals from setting up shell enterprises and committing tax fraud through fictitious businesses.

Strengthen the comparison of export information such as bills of lading. The bill of lading is a receipt for the goods exported by an enterprise, a contract of transportation and a certificate of title to the goods. In order to reduce costs, the current export of enterprises generally adopts the sea freight method, and the freight container number in the bill of lading is unique. Therefore, in the daily supervision, the tax authorities should require the export enterprises to provide relevant customs declaration companies, freight forwarding companies, as well as the names and contact information of the transportation enterprises, and regularly cooperate with the customs and other departments to analyze and verify the authenticity of the information such as the freight bill of lading of the enterprise through online data review and departmental investigation, and transfer the suspicious documents and enterprises to the inspection department for investigation and punishment in a timely manner, so as to realize the early identification and crackdown on illegal tax fraud activities.

Source: China Tax News, 2024-04-30 edition: 06. The content of this article is for general information purposes only and is not intended as formal auditor, accounting, tax or other advice, and we cannot guarantee that such information will remain accurate in the future. No person should act on the basis of the information contained herein without having due regard to the relevant circumstances and obtaining appropriate professional advice. The articles reproduced in this issue are for academic exchange purposes only. The original copyright of the article or material belongs to the original author or original copyright owner, and we respect copyright protection. If you have any questions, please contact us, thank you!