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Police nail 200 suspects in 1b yuan tax fraud bust
From:Shanghai Daily  |  2018-09-07 02:29

POLICE have made hundreds of arrests in what could turn out to be the biggest tax fraud in the city for years.

Over 220 suspects were netted in raids across the city on Wednesday.

At a press conference yesterday, officers explained how tax authorities had been swindled out of billions of yuan since March.

The gang allegedly purchased local companies on the brink of bankruptcy for token amounts of money. The object of buying these foundering businesses was to gain control of their VAT receipts.

The gang then “issued” these receipts to 25 middle-men who passed them on to other companies. More than 1 billion yuan (US$145 million) worth of phony receipts were issued since March this year.

Police estimate the resultant loss to the taxpayer to be over 100 million yuan.

Principal suspect Yang, together with two of his relatives, set up an investment company this year. They employed a team to identify failing companies, and purchased the entire business for between 2,000 and 15,000 yuan.

They applied to the tax bureau for blank VAT invoices in the names of the failing companies, filled them in for phantom transactions and passed them on their agents. The receiving companies then reduced their profits on paper, and thereby their tax bills.

They gang often sold invoices for five to 10 times the amount they had paid for company, making a profit of about 10 million yuan each month.

The company had over 200 employees and operated out of 10 offices around Shanghai before it was taken down.

Police raided 16 locations early Wednesday morning, where they discovered details of over 1,000 companies and over 1,000 business stamps, as well as 70,000 blank VAT invoices.

The gang could potentially have claimed another 140,000 blank VAT invoices with a total face value of 12.6 billion yuan in the next two months. That would mean a tax loss if about 1.8 billion.

All of the suspects are now in detention

Police said they will continue to investigate the companies that were sold to the gang, and also those to whom the VAT invoices were issued.

Chongming police began the investigation in June after receiving reports from companies that VAT invoices for about 10 million yuan were issued in their names to other companies without their knowledge.