Editor's Note: After the refined oil products module went online, new behavioral patterns of false invoicing in the petrochemical industry have emerged, and red-flush false invoicing is one of them. In practice, some judicial authorities have dealt with red-flush false invoicing of refined oil products as the crime of false invoicing, but this does not accurately grasp the true nature of this type of behavior. The author will take the two declaration forms as the key hand to prove that the essence of the behavior of red-flush false invoicing is to sell the inventory data of refined oil products in order to evade the consumption tax, so as to help the judicial authorities to correctly convict the behavior on the basis of correctly exploring the essence of the behavior, so as to provide the practical judicial protection for the only legal interest of the national consumption tax interests that are infringed upon in this kind of cases.

I. Introduction

(i) What is an invoice red flush in the refined petroleum products industry?

According to the Announcement of the State Administration of Taxation on Relevant Issues Concerning the Collection and Management of Consumption Tax on Refined Oil Products (SAT Announcement No. 1 of 2018), all invoices for refined oil products must be issued through the refined oil products invoicing module in the new VAT invoice management system.In March 2018, the Golden Tax System formally went online with the refined oil products invoicing module, which strictly controls the inventory of petrochemical producers and trading enterprises, and puts restrictions on the issuance of invoices and deduction restrictions. Against the background of the new tax regulatory policy, refined oil trading enterprises can only issue invoices for refined oil to the outside world after obtaining input invoices for refined oil and entering their inventory in the refined oil invoice module, and they cannot issue invoices for refined oil without refined oil inventory, so that the arbitrary change of invoices by the trading enterprises in the past could not be carried out.

As the saying goes, "where there is a policy from above, there are countermeasures from below", the motive of consumption tax evasion always exists, and after the product oil invoice module is on line, a variety of new means of consumption tax evasion have been derived, such as the use of product oil invoices to invoice the time difference between the red punch, forged product oil customs import payment letters to falsely increase the inventory of invoicing, and outsourcing of processing invoicing of tax arrears, The use of historical legacy of false inventory external invoicing, gas station surplus invoices back to the refining enterprises and so on. This article will discuss the first scenario, i.e., the use of refined oil invoice red punch time difference for external invoicing. According to the State Administration of Taxation Announcement No. 1 of 2018, after the issuance of special invoices for refined oil products, in the event of return of goods, errors in invoicing, and sales discounts, special invoices for refined oil products should be issued in red according to the regulations. The issuance of red-letter special invoices for refined oil products, which is also referred to in this article, is the red punch of the invoice for refined oil products.

(ii) The essence of the red flush model: selling refined oil inventory data to evade consumption tax

According to Huatax Observation, in practice, for the behavior of using red flush means to inflate inventory data of refined oil products and then falsely issuing VAT invoices for refined oil products to the outside world, it is mostly recognized that the enterprise accepting red flush invoices to inflate inventory data and then issuing false invoices to the outside world is the subject of false invoicing, which causes loss of national tax and constitutes the crime of false invoicing. However, is this characterization accurate? Does it deviate from the essence of the behavior? Does it violate the principle of consistency between crime and punishment? In the author's opinion, the essence of the behavior of false invoicing of refined oil products by using red flush means is to evade consumption tax by selling refined oil products inventory data, which does not constitute the crime of false invoicing.

Take the above red-flush false invoicing business process as an example, Enterprise A issued a naphtha invoice to Enterprise B and then red-flushed the invoice, leaving a naphtha inventory for Enterprise B, which in turn can issue naphtha invoices to downstream enterprise D. Enterprise A will red-flush the invoice to Enterprise B because Enterprise B lacks input invoices, so it will contact Enterprise C to purchase chemical invoices. Because Enterprise A red-flushes the invoice, Enterprise B lacks input invoices and therefore contacts Enterprise C to purchase chemical invoices. For Enterprise D, after obtaining the inventory data of refined oil products, it can also issue naphtha invoices to Enterprise E, which will further distribute the products for external sales. In the above business process, the essence of the behavior of Enterprise A, Enterprise B, and Enterprise D participating in red hedging is to sell refined oil inventory data. Enterprise A creates false inventory of refined oil to Enterprise B by means of red hedging, Enterprise B then transfers the inventory of refined oil to Enterprise D, and Enterprise D then sells the inventory of refined oil to Enterprise E. It can be seen that the understanding and determination of the essence of the behavior of the red hedging enterprises cannot be separated from the analysis of the formation, circulation and use of the inventory of refined oil in the case. Only in this way can the real legal interests infringed upon in the case be clarified and the real subject of consumption tax evasion be identified.

II. the key grips for exposing the nature of the red flush-type virtual opening behavior are these two tables

As mentioned earlier, the essence of the act of issuing false invoices by means of red flushing is to sell the inventory data of refined oil products in order to evade consumption tax. The question is, how to verify that the enterprise is selling refined oil inventory data rather than issuing false VAT invoices? The key hand is these two tables - the main table of the "Consumption Tax Return for Refined Products" and the schedule of the "Consumption Tax Return for Refined Products" - the calculation table of the amount of tax allowed to be deducted for the current period. Among them, the main table reflects the sales of the false inventory data, and the schedule reflects the source and digestion process of the false inventory data. Taking the sequence of acquisition, digestion, and sale of Enterprise D's refined oil product inventory data in the aforementioned case, the specific analysis is as follows:

(i) Schedule: Calculation of tax deductions allowed for the period

In the above case, the production enterprise D has the qualification of production of refined oil products, and after obtaining the invoice of refined oil products issued by the trading enterprise B, it carries out the authentication in the comprehensive service platform of VAT invoice, so as to confirm the quantity of naphtha purchased outwardly and put into storage in the current period. According to Enterprise D's calculation table for the current period's permitted deduction of tax, assuming that Enterprise D confirms the current period's purchased-in quantity of 96,950,000 liters (70,000 tons × 1,385 liters/ton) and will falsely issue 60,000 tons of naphtha invoices to the outside world, Enterprise D will transfer 83,100,000 liters (60,000 tons × 1,385 liters/ton) from the current period's purchased-in quantity into the permitted deduction of this period in the form of "Quantity permitted to be deducted for the current period × unit tax" to calculate the permitted tax deduction for the current period of RMB 126312,000 (83,100,000 liters × RMB 1.52/liter), which will be used for false deduction when filing the consumption tax return. Accordingly, the "quantity purchased into the warehouse in the current period" reflects the source of the false refined oil inventory data, and the "quantity allowed to be deducted in the current period" and "amount of tax allowed to be deducted in the current period" reflect the digestion process of the false refined oil inventory data. The "quantity allowed to be deducted in the current period" and "amount of tax allowed to be deducted in the current period" reflect the digestion process of the false refined oil inventory data.

(ii) Main form: Consumption tax return for refined oil products

According to the main table of the "Consumption Tax Return for Refined Products Oil" of Production Enterprise D, assuming that Enterprise D is currently falsely invoicing 60,000 tons of naphtha to the outside world, Enterprise D has to declare the sale of naphtha in the main table, the quantity of naphtha sold in the current period is 83,100,000 liters (60,000 tons × 1,385 liters/tons), and declare that the consumption tax payable for the current period is 12,631,200,000.00 yuan (83,100,000 liters × 1.52 yuan / liter). And the red flush to the false inventory data just for false deduction of consumption tax payable, then in fact the enterprise D without paying a huge amount of consumption tax, you can transfer the false inventory data to the outside world. Accordingly, the "Sales Quantity for the Current Period" on the main table can reflect the external sales of the false inventory data of refined oil products.

(iii) Selling oil product inventory data results in helping downstream consumption tax evasion

In the sales data declared by Production Enterprise D, it is assumed that all the naphtha is sold to Downstream Production Enterprise E and the quantity of naphtha invoiced is 60,000 tons. As a result, by means of false deduction, Producer D converts the inventory of refined oil products into the amount of deduction allowed for the current period, and then sells the inventory data of refined oil products to the downstream producer E by means of false sales of foreign invoices, while the downstream producer E can realize false deduction of the inventory data of naphtha when it sells naphtha produced by processing raw materials, so as to realize the purpose of evading the consumption tax. If the downstream of production enterprise D is a trading company, the trading company will certainly sell the false inventory data obtained from enterprise D to other production enterprises for false deduction to evade consumption tax.

Therefore, the essence of producer D's behavior of dumping refined oil inventory data is to help downstream producers evade consumption tax.

III. why the red punch invoice can not flush out the refined oil inventory data?

By analyzing the main table and schedules of the "Consumption Tax Return for Refined Products" of Production Enterprise D, it can be known the fact that it sells refined oil inventory downstream, and the refined oil inventory data of Enterprise D is transferred through the red-flush of Enterprise A and the transfer of Enterprise B. The question is why the red-flush invoice does not flush out the refined oil inventory data. The question is, why can't the red-flush invoice flush out the refined oil inventory data? How can the refined oil inventory data be created out of nothing?

(i) Producer A creates inventories of refined oil products by means of red hedging

Production enterprise A issues a naphtha VAT invoice to trading enterprise B and then red-flushes the invoice. Because the refined oil module is not connected to the input module, after production enterprise A red-flushes the invoice, the red-lettered invoice is not deductible against the input, and trading enterprise B will contact enterprise C to purchase chemical input invoices in order to make up for the input, but the naphtha inventory data can be retained in the invoicing system of trading enterprise B. In this process, Production Enterprise A realizes the creation of inventory without paying consumption tax. After obtaining the invoice for refined oil products, trading enterprise B pre-empted the red-flush of the invoice by entering the refined oil inventory data in the refined oil consumption tax management module of the VAT invoice comprehensive service platform, and then downloaded the refined oil inventory data in the tax-control disk, and thus obtained the refined oil inventory. After the invoice is red-flushed, Enterprise B's inventory data will not disappear on its own, but needs to be withdrawn manually, and Enterprise B only needs not to operate the manual withdrawal in order to keep the false refined oil inventory data.

(ii) Transfer of stocks of refined petroleum products by trading company B through the refined petroleum products module

Trading enterprise B downloads the refined oil inventory data in the tax-control disk, then consumes the inventory data and issues naphtha VAT invoices through the tax-control disk to production enterprise D, transferring the naphtha inventory data created by production enterprise A to production enterprise D. At this point, the source of the quantity of purchased-in inventory of production enterprise D can be clarified, i.e., production enterprise A, by red-flushing but not withdrawing the naphtha inventory data, enables trading enterprise B to obtain the naphtha inventory data and further transfer it to production enterprise D. In other words, by red hedging but not withdrawing the naphtha inventory data, producer A enables trading company B to obtain the refined oil inventory data and then transfer it to producer D.

IV. "False opening" of Production Enterprise D should be dealt with as an aiding and abetting crime of tax evasion.

According to the Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Application of Law in Handling Criminal Cases of Endangering Tax Collection and Administration (Fa Shi [2024] No. 4), Paragraph 2 of Article 10, "Those who, for the purpose of falsely increasing their performance, financing, or loaning money, do not aim to fraudulently offset taxes and do not have fraudulently lost taxes as a result of the offsetting, shall not be subject to the punishment for this crime and, if it constitutes any other crime, shall be held criminally accountable for that crime in accordance with the law. other crimes, criminal responsibility shall be pursued in accordance with the law." The incriminating provisions of the two new judicial interpretations indicate that the act of false invoicing does not necessarily constitute the crime of false invoicing. The invoice of refined oil carries various functions such as accounting vouchers, income tax deduction vouchers, VAT deduction vouchers and consumption tax deduction vouchers, etc., and the act of falsely opening the invoice of refined oil does not necessarily constitute the crime of false invoicing.

Finally, returning the perspective to the business process of the red-flush fictitious case in this paper, the following conclusions can be drawn:

(i) Subjective: not based on the intent to defraud the State of tax, but to evade the duty to pay consumption tax

By grasping the two tables that are key to the essence of the behavior of the red-flush mode and analyzing the formation, circulation and use of refined oil inventory data in each link, it is possible to draw the important conclusion that the enterprises appear to be fraudulently issuing special invoices in each business chain, but are in fact dumping refined oil inventory data. Whether it is the formation of refined oil inventories through the red flush mode or the transfer of refined oil inventories through false deductions and false sales, the subjective purpose of each enterprise is based on the purpose of evading consumption tax rather than the intent to defraud the state of VAT tax. The difference in subjective purpose has an important impact on the conviction and sentence of the enterprises. The subjective purpose on which the act was committed is even more important in demarcating the crime of false invoicing and the crime of tax evasion.

The essence of the social harm of false invoicing and deduction of value-added tax is to illegally take possession of the value-added tax that the State has recognized as having been collected on behalf of the State, which is essentially "cheating" the State's property and infringing on the State's tax right in rem. The social harm of selling refined oil stocks to evade consumption tax is to illegally reduce the tax debt that should be borne by downstream production enterprises, which is essentially "evading" the debt to the State and infringing on the State's tax claims. The results and negative impact of the two on the national tax administration order are not the same; although the latter will result in a loss of national tax revenue, it will not jeopardize the fundamentals of the national tax administration order.

(ii) Objectively: the credit function of VAT invoices was not utilized to obtain unlawful tax benefits

According to the relevant provisions of the Provisional Regulations on Value-added Tax, the VAT tax obligation is related to the sales behavior and not related to the invoicing behavior, and the subject who has taxable sales behavior has the VAT tax obligation, and the subject who does not have taxable sales behavior, even if it issues invoices externally, does not have the VAT tax obligation. Since Enterprises A, B and D did not actually sell the goods of refined oil products, they issued invoices of refined oil products to the outside world and did not have legal tax obligations, and the non-payment of output tax recorded in the invoices would not result in the loss of VAT of the State.

Production enterprise E obtains invoices for refined oil products from production enterprise D, and production enterprise F obtains invoices for refined oil products from trading enterprise E for false deduction of consumption tax payable arising from actual production, implying that the enterprise must have really occurred the taxable production behavior of purchasing crude oil and chemical raw materials to produce refined oil products, and in the link of real purchasing of raw materials, production enterprises E and F must have obtained the input of crude oil and chemical raw materials Invoice. Since the purpose of Production Enterprises E and F obtaining invoices for refined oil products from the previous companies in the chain is to falsely increase the inventory of refined oil products for false deduction of consumption tax, in the process of obtaining the invoices, they inevitably falsely increase the input tax, but since Production Enterprises E and F obtaining the input invoices of crude oil and chemical raw materials have already recognized the amount of input tax, which is sufficient to deduct the output tax arising from the real sale of refined oil products, the obtaining of the Therefore, after obtaining the invoice for refined oil products, production enterprises E and F will result in the over-recognition of input tax, and there is no need to offset this part of the over-recognized input tax. Thus, it can be seen that in the whole business chain, the enterprises did not utilize the deduction function of the VAT invoice to obtain unlawful tax benefits, which resulted in the loss of VAT payment of the State.

(iii) The real subject of interest in consumption tax evasion: downstream or further downstream production enterprises

In this case, Enterprises A, B and D did not engage in taxable production behavior, and according to the Provisional Regulations on Consumption Tax and related regulations, they did not bear consumption tax obligations, but the three companies' external selling of refined oil inventory eventually led to downstream producer E or downstream producer F being able to evade consumption tax. After obtaining the inventory of refined oil products, downstream production enterprise E or downstream production enterprise F further dispenses the goods for external sales. After obtaining the naphtha invoice, the other party falsely confirms the quantity of purchased stock, falsely increases the inventory of refined oil products for the current period, falsely declares the continuous production of taxable refined oil products by purchased naphtha, falsely deducts the consumption tax contained in the inventory of refined oil products and falsely offsets the consumption tax that should be paid by the real production behavior, so as to realize the purpose of underpayment of consumption tax. This series of behaviors belong to the false tax declaration behaviors of adopting other deceptive and concealment means to non-pay or underpay consumption tax.

If this case is charged with the crime of false opening, it will be impossible to identify the real subject of excise tax evasion, resulting in the loss of national excise tax being irrecoverable. If the intermediary enterprises and related personnel, which only obtain the secondary benefit of benefit fees paid by the downstream enterprises, are charged as the subject of consumption tax evasion, it will lead to the impunity of the downstream or sub-downstream production enterprises that obtain the main benefit of consumption tax, and it is difficult to realize the real safeguard for the interests of the national consumption tax. Therefore, the downstream or further downstream production enterprise is the direct subject of consumption tax evasion, which meets the constituent elements of tax evasion crime and should be held legally responsible for tax evasion, and the three companies in the middle are not the subject of consumption tax payment, and their provision of refined oil stock for the downstream enterprises to evade consumption tax is a helping behavior, which should be punished as aiding and assisting offender in the crime of tax evasion. The judicial authorities should reach out to the downstream production enterprises that really use these false inventory data and really evade consumption tax, instead of focusing only on the responsible subject of selling inventory data, otherwise it will be difficult to realize the strong protection of national tax.