Recently, Xinhuanet reported that the Economic Investigation Corps of the Shanghai Municipal Public Security Bureau, together with the Baoshan Public Security Bureau, and the Inspection Bureau of the Shanghai Municipal Taxation Bureau, jointly detected a case of using low-priced "tennis strings" and "badminton strings" as props and goods to circulate exports to defraud tax refunds, involving tens of millions of tax refunds. As a typical illegal act of defrauding export tax rebates, circular export has strong concealment and harmfulness. In view of this, this article takes this case as a starting point to analyze the types of businesses that use circular exports to defraud taxes, and provides defense space and compliance suggestions for the majority of foreign trade enterprises to study and reference.

I. Actual case analysis: a batch of tennis strings exported 48 times, defrauding tens of millions of tax rebates

(I) Basic facts of the case: 48 times of tax fraud by using sports wire rod to circulate exports

Xinhua News Agency reported that the criminal gang that fraudulently obtained export tax rebates registered more than 10 foreign trade companies in Shanghai, and first purchased low-grade badminton strings and tennis strings at low prices ranging from 0.65 yuan to 0.9 yuan per piece to be used as props for export.
Since special VAT invoices are required for export tax rebates, in order to tamper with the names of the goods and obtain input invoices with higher face value, the gang asked a group of sporting goods retailers in Zhejiang, Fujian, Guangdong, Liaoning, Shanghai and other places to issue invoices with prices ranging from 25 yuan to 64 yuan each by paying a 3% benefit fee on face value, with the names of badminton strings and tennis strings.
After the goods were declared for export, on the one hand, the criminal gang illegally exchanged foreign currency to pay a fictitious foreign businessman to the criminal gang of the underground bank by paying a 5% handling fee, obtained foreign exchange collection records, and declared export tax rebates; On the other hand, other foreign trade companies will replace the goods with the low-cost "mowing line" and import them at a very low price. Then repeat the above-mentioned illegal acts of "ticket allocation" export and underground money bank buying foreign exchange, and declare export tax rebates.
After investigation, the gang used 10 tons of sporting goods wire rod to circulate and export 48 times, and defrauded the state of tens of millions of yuan in export tax rebates.

(II) Business transaction mode: there are indeed exports of goods, and the concealment is strong

In practice, in order to obtain the benefits of national tax rebates, criminals carry out different means of defrauding export tax rebates, such as common "pay for bills and match tickets", "fake self-management, real agents", "circular export of props and goods", etc. Among them, the behavior of tax fraud in the circular export of props and goods has certain particularity and concealment, which is worthy of the attention of the majority of foreign trade enterprises to avoid risks. Take this case as an example"

1. The circular export of props and goods includes the export of goods, that is, the badminton string and tennis string in this case. Therefore, compared with "paying for the ticket", because it has a real export of goods, the modus operandi is more concealed.
2. Circular export may be associated with smuggling. For example, in this case, although the goods were exported, the illegal means of "low value and high declaration" were adopted when the goods were exported. Then it took the form of "high value and low reporting" to import back to China. Another example is that some land border areas may adopt the method of smuggling and smuggling props and goods back to the country.
3. Circulating export tax rebates still need to falsely issue special VAT invoices and purchase foreign exchange from underground banks, which is extremely harmful, for example, in order to achieve fraudulent tax refunds, the criminal gang in this case purchased goods in the procurement process, and matched them with false VAT input invoices, and at the same time, in order to meet the conditions for tax refunds, fabricated records of foreign exchange collection, and the criminal liability is extremely high.

(II) Analysis of the legal risks of parties involved in circular export tax fraud

The crime of defrauding export tax rebates is a complex criminal act. It can be seen from the above-mentioned complex business transactions in this case that other acts in the chain of fraudulent export tax rebates can also be evaluated as a crime by the criminal law alone. Therefore, the determination of the crime of fraudulent export tax rebates has a certain complex type: that is, different entities involved in the tax fraud chain may face different criminal liabilities according to their different objective behaviors and subjective purposes, which are briefly analyzed as follows:

1. The gang that carried out the circular export of props and goods was suspected of committing the crime of defrauding export tax rebates
Subjectively, in order to defraud export tax rebates, the gang objectively carried out the acts of allowing others to falsely issue special VAT invoices for themselves, "low-value and over-reporting" of props and goods, and "circular exports", and finally obtained state tax rebates, and should be punished as the crime of fraudulently obtaining export tax rebates. There is a view that it may constitute the crime of fraudulent export tax rebate and the crime of false issuance of special VAT invoices, but the author believes that this view is inappropriate. The theory of criminal law holds that in order to achieve the goal of a crime, the means to commit other crimes are "implicated offenders" and should be punished with one crime, rather than multiple crimes.
The Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Fraudulent Export Tax Rebates (Fa Shi [2002] No. 30) also reflects this viewpoint, and Article 9 stipulates that: "If the crime of fraudulent export tax rebate is committed, and at the same time constitutes the crime of false issuance of special VAT invoices and other crimes, it shall be convicted and punished in accordance with the provisions of the Criminal Law with heavier punishments." According to this provision, if the circular export of "props and goods" involves smuggling and other crimes, it is also an implicated offender and will be punished as the crime of defrauding export tax rebates.
2. Sporting goods retailers may be suspected of the crime of fraudulent export tax rebates or the crime of falsely issuing special VAT invoices
The sporting goods retailers who inflated the invoices for the criminal gang were mainly accumulating wealthy tickets. Since their customers are mainly end individual consumers, there is no awareness and habit of asking for invoices, which provides convenience for these retailers to accumulate surplus tickets. In order to obtain improper benefits from the invoicing fee, these sporting goods retailers renamed the surplus tickets in their hands as "badminton strings" and "tennis strings" without real transaction business, and issued false VAT invoices for Hu's gang, violating the criminal law.
According to our observations in practice, if the investigating authority identifies the issuing party as a link involved in the fraudulent export tax rebate and includes it in the handling of the case of the crime of fraudulent export tax rebates, it may be determined as an accomplice to the fraudulent export tax rebate and be regarded as the crime of tax fraud. If the investigating authority separates the two parts into two cases and separately investigates the issue of false issuance of special VAT invoices by sporting goods retailers, it may constitute the crime of false issuance of special VAT invoices.
3. The underground money bank gang is facing the crime of defrauding export tax rebates and illegal business operations
Similar to sporting goods retailers, if they are included in this case and investigated, they may be found to be accomplices in defrauding export tax rebates, and will be considered as a crime of tax fraud.
If it is not included in this case, or if the underground bank participates in the fraudulent export tax rebate, there are other illegal acts of selling foreign exchange, which constitutes the crime of illegal business operation. According to the provisions of Article 225 of the Criminal Law, the crime of illegal business operation refers to the illegal operation of monopoly or monopoly goods or other restricted items stipulated by laws and administrative regulations without permission, the purchase and sale of import and export licenses, import and export certificates of origin and other business licenses or approval documents stipulated by laws and administrative regulations, the illegal operation of securities, futures and insurance business or the illegal engagement of fund payment and settlement business without the approval of the relevant competent state authorities, as well as other illegal business activities and disrupting market order. Aggravating circumstances. Illegal engagement in fund payment and settlement business, illegal trading of foreign exchange and other acts of underground banks is one of the criminal acts of illegal business operation, and is suspected of constituting the crime of illegal business operation.

II. Inventory of other situations of circular export tax fraud

In fact, in recent years, there are no longer a few crimes of using circular export and other compound means to defraud export tax rebates, which seriously endangers the interests of national taxation and disrupts the national tax order.

(I) Using the "border people's mutual market policy + circular export" to cheat taxes
In the case of Xiong's crime of defrauding export tax rebates (2018) Zhe 0212 Xingchu No. 488, Xiong, Dong, and Ye cooperated in the export business of sea cucumbers. Dong provides goods, foreign businessmen, payment, customs declaration, logistics, warehousing, etc., and Ye's company is responsible for issuing invoices, applying for inspection, declaring export tax rebates, etc., and agreeing on tax rebate sharing and payment methods and other related matters. Among them, after the sea cucumber is exported, it enters the country through the border people's mutual market policy, forming a cycle from Shenzhen to Hong Kong, and then to Vietnam, and then falsely reporting this batch of goods as border people's mutual market trade goods to the territory, so as to defraud the state of tax rebates.
In such cases, after the perpetrator exports the goods abroad, he or she falsely declares the goods imported by ordinary trade as border residents to smuggle them into the market, or adopts the means of falsely declaring the name of the goods and concealing them to smuggle them, so as to evade the payment of the import link, and may also be suspected of the crime of smuggling ordinary goods. However, the author believes that smuggling goods is a means of tax fraud, and according to the principle of implication, it should only be punished for the crime of defrauding export tax rebates.

(II) Using "precious metals + circular exports" to cheat taxes

In August this year, the Guangdong Provincial High People's Court released three typical cases of cracking down on the crime of false issuance and tax fraud. Among them, a case of using gold as a prop for circular export was on the list. Defendant Liu Moumou and others jointly invested in the establishment of an intelligent technology company, and on the premise of knowing that the export of gold and gold-containing products with a raw material cost of more than 80% of the cost of gold could not be refunded, they adopted false means to reduce the proportion of gold in the export of gold-inlaid smart equipment to less than 80%, so as to evade supervision. After the product is exported, on the one hand, the gold will be dismantled and sold, and on the other hand, the remaining parts will be imported through the customs declaration of affiliated companies, and then assembled and processed into gold-containing products, which will be recycled and reflowed, and the national export tax rebate will be defrauded.
According to the provisions of Article 3 of the Administrative Measures for the Import and Export of Gold and Gold Products, China implements a permit system for the import and export of gold and gold products. At the same time, according to the notice of the Ministry of Finance and the State Administration of Taxation on the export tax rebate policy for goods with precious metals and gemstones as the main raw materials (CS [2014] No. 98), if more than 80% of the raw material cost of the goods exported by export enterprises and other units is the raw material listed in the annex to this notice, it shall be implemented in accordance with the value-added tax and consumption tax policy of the raw materials with the highest cost proportion. This includes gold and silver.
Therefore, due to the control and adjustment of precious metal export policies, the cost of raw materials accounted for by adding precious metals is controlled within the red line of 80%, and the cases of circular export and export tax rebate fraud are gradually increasing. However, what is different from other props is that after exporting, the perpetrator dismantles gold and other precious metals abroad, and then the rest of the accessories are imported into the country and then loaded into gold and precious metals for export. In this process, precious metals such as gold are sold overseas, and there is no such thing as recycling of precious metals, but props such as smart devices inlaid with gold are circulating.
Therefore, in judicial practice, some courts have also punished the defendant for the crime of smuggling precious metals and the crime of fraudulently obtaining export tax rebates.

(III) Using "agricultural products + circular exports" to cheat taxes

Compared with other props, agricultural products are not only reproduced at a higher tax rebate rate, but also have the characteristics of being easy to store and carry. In addition, the invoices for the purchase of agricultural products have the characteristics of self-filling and self-crediting, which are easily used by criminals to fabricate the materials and procedures required for tax fraud.
Previously, Guangxi reported a case of using agricultural products as props to circulate exports and defraud taxes of 1.43 billion yuan. The criminal gang used mushrooms, fungus, tea and other agricultural products as props, and first exported the goods to Malaysia and other Southeast Asian countries by signing false foreign trade export contracts, and then smuggled these goods into the country through border smuggling gangs, and repeatedly used them to defraud 1.43 billion yuan in export tax rebates.

(IV) Summary

With the development and change of the economy and business model, the means of crime also change. The commonalities of tax fraud by means of circular export are: first, there is the behavior of false invoicing; the second is to transport the goods back to China for repackaging through smuggling, border trade duty-free policies, etc.; The third is to fabricate foreign exchange settlement records and construct the illusion of foreign exchange settlement. The difference lies in the fact that some use the policy of border residents to exchange markets, some use the means of low-value and high-reporting, and some falsely issue invoices for agricultural products.

III The Defense Space of Circular Export Tax Fraud

(I) Application of law: Analyze the constitutive elements of the crime of fraudulently obtaining export tax rebates one by one

At the legal level, Article 205 of the Criminal Law and Legal Interpretation [2002] No. 30 provide for the crime of fraudulent export tax rebates. To constitute the crime, subjectively, there must be an intention to cheat tax on export tax rebates; Objectively, tax fraud by false export declarations and other deceptive means has been carried out; In terms of amount, the amount of tax refund fraudulently reached more than 50,000 yuan.
The tax fraud in this case was a gang crime, and the network and chain were intricate. Among them, if the perpetrator is not aware of the tax fraud he is engaged in, does not have the intention of tax fraud subjectively, and is only engaged in procedural work such as customs declaration in accordance with the complete materials in the export tax rebate, it should not be characterized as tax fraud.
For example, when the criminal gang exports the goods, it needs to contact the freight forwarding company, customs broker and other export declaration units, and these export declaration units only conduct a formal review of the exporter's information, and declare customs clearance and export on their behalf, if they objectively only perform procedural matters and subjectively do not know that they are involved in tax fraud, they cannot be identified as aiders in tax fraud.

(II) Facts: Whether the evidence for the alleged perpetrator to constitute the crime of tax fraud is credible and sufficient

From the above cases, it can be seen that the declaration of export tax rebate needs to focus on the procurement process, customs declaration and export, foreign exchange collection and settlement. Therefore, the judicial authorities need to verify the above-mentioned links one by one and form a complete chain of evidence. For example, is it true that the goods being exported in circulation are the same goods? Is there a situation of "true and fake", that is, part of the goods is false and part of it is true? For the part where there is actual export of goods, but there are non-compliance in form, the actual export part shall be excluded, and it should not be found to be tax fraud in the criminal law.

(III) Sentencing: Strive for commutation or lighter punishment

The amount of false issuance and tax fraud affects the severity of the sentence. In the recycling of export goods, there may be different batches of goods exported, and some props are not recycled. Therefore, it is necessary to find out the circulation of export goods, and it is not possible to convict and sentence all based on the amount of tax refund.
In addition, it is also necessary to ascertain the status and role of each offender in the joint crime. For some accomplices, they shall strive for commutation or lighter punishment in terms of their position, participation in the crime, and profits. All the personnel involved in the case also sought meritorious service by reporting co-offenders and other means, and commuted or lightened punishments.

IV Analysis of the key points of export compliance of foreign trade enterprises

(I) Strengthen the ability to integrate "business, finance, law and taxation", and do a good job in risk prevention and control

In addition to the types of circular export tax fraud, foreign trade enterprises also have the risk of suspected tax fraud such as "paying bills and matching bills", "fake self-management, real agency", "low-value and over-reporting" and providing false filing documents. Different business models and industries involve different risk points. Personnel of foreign trade enterprises need to strengthen the study of industry, taxation, accounting and other policies according to their own industry characteristics and business models, avoid illegal models, and do a good job in risk prevention and control. For example, in the export tax rebate business of products with precious metal components, enterprises should pay special attention to the red line of the proportion of silver and gold, and properly retain accounting documents such as raw materials to prove that the proportion of silver and gold is far less than 80%. This requires that when enterprises conduct business, they should accurately understand and apply export tax rebate policies, financial treatment, and tax knowledge in multiple dimensions such as business, finance, taxation, and law, retain the materials involved, and carry out export business in accordance with laws and regulations.

(II) With the help of external forces, carry out export tax rebate compliance inspections

As mentioned above, there are many links in export tax rebate and the process is complex. Therefore, it is necessary for foreign trade enterprises to assess the risks of the business and form a report before conducting business; In the course of business development, various processes should be checked regularly and on time, for example, the management of documents such as special VAT invoices and customs declarations should be strengthened, and the investigation of suppliers and foreign businessmen should be strengthened. If an enterprise is uncertain about some complex and difficult business, it may consider hiring an external tax professional to conduct special inspections for it to prevent the risk of tax fraud.

(III) Actively resolve criminal risks at the tax stage

Generally speaking, most tax-related cases are inspected by the tax authorities and then transferred to the judicial authorities. If the tax fraud case can be communicated with the tax authorities at the tax inspection stage, it will be able to obtain their approval, so as to effectively avoid the expansion of tax risks. For example, "fake self-employment, real agency" and "provision of false filing documents" do not necessarily constitute the crime of defrauding export tax rebates, and such administrative violations can only be punished with administrative penalties, and they should promptly explain to the tax authorities from the legal level, business authenticity, etc., that they have no tax fraud and no intention to cheat taxes, so as to avoid being transferred to the public security.