At the conference of the judicial interpretation on criminal cases endangering tax collection and management issued by the two high authorities, the relevant leaders of the Supreme Prosecutor's Office suggested that agricultural products have always been the industry that the Supreme Prosecutor's Office is concerned about, and that it has jointly issued the minutes of the meeting on the criminal cases of tax fraud using agricultural products exported with the Ministry of Public Security. As an important member of the Eight Sectors' Working Mechanism for Jointly Combating Tax-Related Crimes, such a statement by the Supreme Prosecutor indicates that the supervision of agricultural products will be increasingly strengthened. Cases of tax fraud on agricultural products have also broken out one after another. In view of this, this article analyses the risk points of agricultural products export and puts forward relevant compliance suggestions for the benefit of readers.

I. Multi-departmental Joint Crackdown on Tax Fraud on Agricultural Products and Outbreak of Cases of Fraudulent Tax Opening on Agricultural Products in Various Places

(i) The Supreme Prosecutor cracked down on tax fraud on agricultural products and issued minutes of meetings together with the Ministry of Public Security.

At the press conference on 18 March 2024 when the "two high authorities" issued judicial interpretations on criminal cases of endangering tax collection and management, Yu Shuangbiao, Deputy Director of the Policy Research Office of the Supreme Prosecutor's Office, introduced the cases handled by the procuratorial organs in recent years, pointing out that agricultural products and other industries are still the high incidence of crimes of tax fraud, and that in response to this problem, the Supreme Prosecutor's Office has issued the Summary of the Joint Meeting on Handling Criminal Cases of Using Agricultural Products for Export Fraud in conjunction with the Ministry of Public Security. In response to this problem, the Supreme Prosecutor, in conjunction with the Ministry of Public Security and other departments, jointly issued the Minutes of the Joint Meeting on Handling Criminal Cases of Using Agricultural Products for Export Tax Fraud to strengthen the crackdown. At present, I have not retrieved the full text of the Minutes, but it has already played a role in the current judicial practice and deserves the attention of taxpayers.

In fact, in recent years, the Supreme Prosecutor has continued to crack down on tax fraud crimes involving agricultural products.20 In December 2023, the Supreme Prosecutor and the Foreign Exchange Administration jointly released "Typical Cases of Punishing Foreign Exchange-Related Illegal Crimes," which included a case of using agricultural products to illegally operate and fraudulently obtaining export tax refunds. The case shows that between 2015 and 2020, Wang Mouliang and Wang Mouxin, Wang Moujun and other people for a number of agricultural products company illegal trade in foreign exchange to earn the difference in price, in essence, to help these agricultural products company fraudulent export tax rebates. Among them, a Qingdao agricultural products company to take the low value of the high way to inflate the total export price of agricultural products, cheating the state export tax rebates totalling more than RMB 21.26 million.

(ii) Early intervention by procuratorial authorities to aggravate the criminal risk of tax fraud on agricultural products

At present, the procuratorate presents some new features in the process of handling tax-related cases:

One of them is "early intervention", for example, in the above "Wang Mouliang and Others Illegal Business Case", at the invitation of Qingdao Public Security Bureau, Shinan Branch, Qingdao, Shandong Province, the People's Procuratorate of Shinan District of Qingdao, Shandong Province, intervened in this case in advance, issued procuratorial recommendations to the public security authorities on the handling of the case, investigation and collection of evidence, and provided guidance to the public security authorities on the handling of the case. The People's Procuratorate of Shinan District, Qingdao City, Shandong Province, intervened in the case in advance, issuing procuratorial recommendations to the public security authorities on the handling of the case, investigation and evidence collection, and guiding them in the handling of the case. Early intervention by the procuratorate in the case was able to remedy problems such as bias in the application of the law and insufficient collection of evidence during the investigation by the public security authorities.

Of course, the procuratorial organs should also collect evidence "favourable or unfavourable" to the defendant, and early intervention may be contrary to their neutrality and legal supervision functions. For example, in reviewing arrests and handling corporate compliance, the system is designed so that the procuratorate stands on the "presumption of innocence" and supervises the investigative behaviour of the Public Security Bureau. Now the procuratorial authorities are intervening earlier in the investigative process, making arrangements for and providing guidance on investigation and evidence-gathering, which may lead to the failure of the system for reviewing applications for release on bail and for compliance in favour of the defendant.

The second is "full-chain punishment for fraudulent export tax rebate offences and related offences". As the fraudulent export tax refund involves false VAT invoicing, illegal trading of foreign exchange, illegal trading or obtaining of false export documents, smuggling and other offences, as long as one of the rings of the mine, the whole case is bound to explode.

From a comprehensive point of view, under the current situation of cracking down on agricultural fraud, the risk of agricultural export enterprises (no matter foreign trade enterprises or production enterprises) is high. Whether it is the input invoice, agricultural products purchase invoice, foreign exchange or capital flow, as long as there is a problem in one place, will chain outbreak of related cases, triggering criminal risk.

(iii) Many places have carried out risk investigation of tax rebate business and investigated and dealt with cases of fraudulent tax invoicing of agricultural products.

According to a January 2024 news report, Suizhou City in Hubei Province, a major agricultural product export city, has ranked first in Hubei Province in terms of export value for 18 consecutive years. The Suizhou City Tax Bureau of the State Administration of Taxation (SAT), in conjunction with six departments including commerce and customs, organised a two-month special inspection campaign on tax-related risks, which provided a physical examination of the production, processing and sales of more than 60 agricultural product exporters in the city one by one, and carried out tax refund (exemption) inspections of the enterprises' export business since FY2021, according to the report.

According to the State Administration of Taxation announced the case, recently, Wenshan Zhuang and Miao Autonomous Prefecture, Yunnan Province, the police and tax jointly investigated and dealt with a case of false invoices for the purchase of agricultural products, the lawless elements use the identity of farmers, false purchases of agricultural products purchase business, false invoices for the purchase of agricultural products 3,458, the amount of a total of 200 million yuan.

According to the case announced by Tianjin Municipal Taxation Bureau, recently, Tianjin Municipal Taxation Inspection Department investigated and dealt with a case of cheating export tax rebate by using invoice of agricultural products according to law, and declared export with "low value and high report" to cheat the national export tax rebate of RMB 8,531,000 Yuan, which has been handed over to the judicial organ for treatment.

Through the news of the above tax inspection and investigation cases, it is not difficult to see that with the soundness of the working mechanism of the "eight departments" in jointly combating tax-related crimes and offences, all the places have strengthened the supervision of the acquisition of agricultural products and the export tax rebate, and severely cracked down on the fraudulent export tax rebate.

(iv) Summary: Agricultural export enterprises should be cautious in checking the tax-related risks.

According to the export tax rebate policy and current practice observation, agricultural export enterprises for tax rebate, mainly divided into two types of modes:

One is the mode of "foreign trade enterprises + purchasing enterprises". Since the foreign trade enterprises directly obtain the agricultural products acquisition invoice for export tax exemption rather than tax refund policy, some foreign trade enterprises will graft a procurement enterprise at the front end, and the procurement enterprise will issue the agricultural products acquisition invoice, and then issue the VAT invoice to the foreign trade enterprises.

Second, the production enterprise export mode. That is, the export enterprise is filed as a production enterprise, which directly issues the agricultural products acquisition invoice and handles the export tax refund.

But no matter which mode, once there are agricultural products acquisition invoice false opening, or false purchase of foreign exchange and other phenomena, will break out the risk of fraudulent export tax rebates. This paper discusses the risks from these two aspects one by one. In the latter part of this paper, the unified use of agricultural export enterprises to refer to "foreign trade enterprises + procurement enterprises" or production enterprises.

II the acquisition of agricultural products rely too much on the "purchase of intermediaries", triggering the risk of fraudulent tax evasion

(i) The contradiction between the lack of sales channels for farmers and the lack of procurement channels for export enterprises is prominent.

China's current agricultural market shows a great total, but the business is very dispersed characteristics. As the "main force" of China's agricultural production is the vast number of farmers contracted land, so the production of agricultural products is very dispersed, unable to form a large-scale aggregation effect. This has brought the problem of communication channels to the producers and sellers of agricultural products:

For producers of agricultural products, as they work individually or in families, they rarely have the energy to develop sales channels; even if they have the idea of developing sales channels, they lack bargaining power due to insufficient sales volume. Therefore, they face the difficulty of "having goods but not selling them".

For agricultural export enterprises, they have communication channels with foreign buyers at the border, and are able to develop international markets and open up sales channels for agricultural products. However, these export enterprises are unable to go to all parts of the country to buy agricultural products door-to-door, resulting in the difficulty of "having a market but not buying".

Therefore, in the agricultural products purchase industry, the purchase of agricultural products to communicate between the two sides of the purchase and sale of "purchase intermediary" came into being. These purchase intermediaries to individuals or families, small businesses as a unit, according to the agricultural season to purchase agricultural commodities, and then unified sales to the purchasing enterprises.

(ii) Purchasing intermediaries are unable to issue invoices, and the phenomenon of non-compliant filling of purchase invoices is concentrated.

In the case where the purchasing intermediary is involved, the agricultural products purchasing enterprises should obtain special VAT invoices issued by the purchasing intermediary instead of the agricultural products purchasing invoices.

According to the Provisional Regulations on Value-added Tax, "self-produced agricultural products sold by agricultural producers" are exempted from value-added tax; according to the Circular of the Ministry of Finance and the State Administration of Taxation on Relevant Taxation Policies for Farmers' Specialised Co-operative Societies (Cai Shui [2008] No. 81), "For farmers' specialised co-operatives, the sales of agricultural products produced by members of the co-operative society shall be exempted from value-added tax. According to the Circular of the Ministry of Finance and State Administration of Taxation on Relevant Taxation Policies of Farmers' Specialised Cooperatives (Cai Shui [2008] No. 81), "the sales of agricultural products produced by members of farmers' specialised cooperatives shall be treated as the sales of self-produced agricultural products by agricultural producers exempted from VAT." Therefore, invoices for the acquisition of agricultural products or the sale of agricultural products can be issued in the above cases.

When a purchasing agent is involved in the business of purchasing agricultural products, if the purchasing agent is independent and is neither a staff member of the purchasing enterprise nor a farmer or an agricultural co-operative, then it does not meet the requirements of "agricultural producers" or "farmers' specialised co-operatives". "The provisions of this article are not applicable to agricultural producers or farmers' specialised co-operatives. Therefore, the purchasing intermediary shall issue special VAT invoices to the agricultural export enterprise. However, in practice, as the purchasing intermediary is an individual or a self-employed person, it is unable or unwilling to issue special VAT invoices for the agricultural product exporters, resulting in the agricultural product exporters not being able to obtain compliant input invoices for applying for export tax rebates.

Therefore, some agricultural export enterprises make use of the feature of "self-filling and self-counterbalancing" of agricultural products purchase invoices to list one or two purchase intermediaries on the agricultural products purchase invoices; or find some farmers from the local area and buy their identity information to list on the agricultural products purchase invoices. Thus, the "mine" of false or fraudulent export tax rebates was planted.

(iii) Acquisition intermediaries, farmers' statements are "no goods", export enterprises are suspected of false export declarations.

Tax authorities and public security authorities pay special attention to the authenticity of the acquisition and export of agricultural goods when investigating and handling export tax refund operations involving agricultural products. However, due to the current regulatory idea of "controlling taxes by invoices", tax and public security officers usually start from the invoices, "demand goods by invoices", and contact the so-called "agricultural producers" according to the information of the so-called "agricultural producers" stated on the invoices of the purchase of agricultural products. Based on the so-called "agricultural producers" information contained in the purchase invoices for agricultural products, the tax and public security officers usually start from the invoices, and "demand goods according to the invoices". Have you sold agricultural goods to such-and-such a company?"

If the agricultural export enterprises listed in the "acquisition intermediary", it is clear that these acquisition intermediaries are not agricultural producers in the first place, the acquisition of agricultural products issued by the invoice is not compliant; worse, some acquisition intermediaries will be made "agricultural goods are all my acquisition, but only the use of a company's Worse still, some purchasing agents will make unfavourable statements or testimonies such as "I purchased all the agricultural goods, but only used the name of a company to export tax rebates". Public security, tax will be based on the view that the agricultural export enterprises do not have real procurement, export behaviour, but the loan export, buy a single ticket. In fact, this is just the wrong words of these acquisition intermediaries, wrongly describing the co-operative export mode as a false behaviour without real goods export.

If an agricultural export enterprise lists a false farmer, or finds another farmer, when questioned by the tax authorities or the public security authorities, it is bound to provide a statement that it does not have any goods, and is thus considered to have made a fictitious purchase. On the basis of false procurement link, further can be deduced that the export of agricultural products export enterprises are also false, there may be "buy a single with the ticket" and other false export behaviour.

(iv) Summary: Agricultural invoices are the key factor triggering tax fraud.

As the "Interpretation of the Two High Committees on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Tax Levy and Administration" (Legal Interpretation [2024] No. 4) clearly stipulates that: "Anyone who uses falsely issued, illegally purchased, or obtained by other unlawful means, VAT invoices or other invoices that can be used for export tax rebates" shall declare export tax rebates. The declaration of export tax refund" belongs to the "false declaration of export or other deceptive means" stipulated in the first paragraph of Article 204 of the Criminal Law, i.e. one of the specific behaviours of cheating export tax refund. Therefore, as long as there is a suspicion of non-compliance or false opening of the invoice for the purchase of agricultural products, it is very easy to break out the risk of tax fraud.

III foreign businessmen are mainly small traders and individuals, triggering the risk of illegal purchase of foreign exchange tax fraud

(i) land transport ports near more foreign vendors, foreign exchange settlement difficulties

In addition to invoices, foreign exchange is also one of the factors that plague agricultural export enterprises. According to the author's summary of case experience, in some of China's land transport port clearance is convenient, very close exchanges between domestic and foreign areas, such as Xinjiang, Yunnan and other borders, foreign businessmen outside the port (border people) generally have a large number of RMB. Moreover, due to the poor economic strength of the countries near the land transport ports, the exchange rate changes frequently and the exchange risk is very high. Some foreign businessmen have made it clear that if they use the normal process of exchanging foreign currencies for RMB, they are likely to encounter exchange rate fluctuations and thus lose money. Therefore, most of these foreign businessmen will directly settle in RMB. Or even RMB cash settlement.

After obtaining RMB, the agricultural export enterprises cannot obtain the compliant export settlement information, so they cannot declare the export tax rebate. In this case, some export enterprises illegally buy and sell foreign exchange from underground money changers to meet the formal elements of the application for export tax rebates.

(ii) When investigating and dealing with cases of illegal trading of foreign exchange, cases of fraudulent export tax rebates are often associated with them.

At present, the central bank and the foreign exchange bureau have joined hands with many departments to crack down on smuggling, money laundering, telecommunication fraud and other cases, and knocked down a number of underground money changers. When cracking down on these underground money changers, a number of enterprises illegally purchasing foreign exchange will be investigated and dealt with, which will involve cases of cheating export tax rebates. Especially in some complicated and time-honoured cases, public security and taxation will presume the amount of tax fraud based on the amount of foreign exchange, which shows that the abnormal foreign exchange information plays an increasingly important role in the process of fraudulent export tax rebate cases.

(iii) Summary: Abnormal foreign exchange information is increasingly becoming a trigger for the outbreak of tax fraud cases.

At present, the practice of "eight departments" jointly combating tax-related crimes shows that the foreign exchange management department is not only deeply involved in it, but also actively plays a relevant role. However, the author believes that, after all, foreign exchange is only a brief evidence and "clues", and is not constituted by the decisive evidence of fraudulent export tax rebates, can not be based on how much foreign exchange the enterprise bought, to regress how much the enterprise cheated the tax. Especially for foreign trade enterprises, export tax rebate tax basis is the input VAT invoice tax amount, that is to say, no matter how much foreign trade enterprises buy foreign exchange, as long as the invoice is true, it is impossible to tax fraud, belongs to the "can not be committed". Of course, foreign trade enterprises in order to apply for tax rebates, by buying foreign exchange in the form of foreign exchange can not be settled business can apply for tax rebates, can be made administrative processing penalties.

IV how to strengthen the compliance of agricultural export enterprises to avoid administrative criminal risk of tax fraud?

(i) Adjustment of the mode of co-operation between agricultural export enterprises and acquirers

The reason why many agricultural export enterprises broke out the risk of fraudulent tax fraud, the root cause of the acquisition business business model is flawed. As long as the independent acquisition intermediary involved in the business, will inevitably form a "double sale relationship", that is, farmers sell to the acquisition of intermediary, the acquisition of intermediary sales to agricultural export enterprises. This leads to agricultural products purchase invoice is not open, not open is not. Therefore, first of all in the agricultural products export enterprises and the acquisition of a layer of relations between the staff, such as the acquisition of staff absorbed as business personnel, or the establishment of affiliation, so that the acquisition of staff in the name of the enterprise to buy, so that the farmers become direct sales of agricultural products to the enterprise, to avoid the formation of a "double trading relationship".

In the past, there are some places that have issued the policy of "allowing the collection of purchase invoices", which means that the local tax bureau allows enterprises to fill in the purchase of agricultural products on the purchase invoice of the intermediary. Enterprises should retain the relevant training and documentation to prove that they do not have the subjective intention of false invoicing or tax fraud.

(ii) Adjustment of the business model of cross-provincial and municipal procurement of agricultural goods

The filling of invoices for the purchase of agricultural products has regional restrictions. Generally speaking, the relevant regulations on the issuance of invoices for the acquisition of agricultural products issued by the tax bureaus (previously the State Administration of Taxation) at the level of each province/programmed municipality generally restrict the invoices for the acquisition of agricultural products to be issued only in the county-level region or the prefecture-level region, and the taxpayers who are A-class taxpayers or who are subject to the procedures for inter-regional invoicing are allowed to issue invoices for the acquisition of agricultural products across the provincial boundaries. For inter-provincial acquisition business, only special VAT invoices can be obtained.

Therefore, if agricultural product export enterprises do have the phenomenon of acquiring agricultural products across cities and provinces, they should find ways to adjust their business model, co-operate with local acquiring enterprises or set up acquiring enterprises in the locality, and strengthen the compliance supervision on the authenticity of the business.

(iii) Retention of information, photographs, traces of the authenticity of agricultural goods

The core of the agricultural products acquisition and export business, or the authenticity of the goods. However, many agricultural export enterprises lack of information retention record consciousness, wait until the outbreak of risk, can not put forward the evidence of the real existence of goods, can not contact the actual sale of goods at the time of the real farmers, can not provide a complete payment of goods bank water, can not provide evidence of goods transport, warehousing. As a result, it is easy to be passive. Therefore, enterprises involved in the acquisition of agricultural products should be aware of the risk of false invoicing, and do a good job of retaining information to confirm the authenticity of the goods.

(iv) Actively engage professionals to intervene and put forward defences

If the agricultural export enterprise has been suspected of false invoicing, fraudulent export tax rebates and other behaviours, subject to tax audit or public security investigation, it should clearly understand that the case may lead to heavy criminal liability, and it should actively deal with it by hiring professional tax lawyers to intervene in the case and help the enterprise to sort out the business materials, and to discuss and communicate with it in terms of the authenticity of the goods and the loss of national export tax rebates to help the enterprise to Resolve the risk.