Recently, Zhejiang Provincial Tax Bureau issued a batch of tax processing decisions. Among them, the case of a gang controlling a shell company to falsely issue VAT invoices deserves attention. The case belongs to the invoicing mode of "distribution circulation", and the enterprise involved in the case has falsely issued nearly 700 million, and after the Jinhua Intermediate Court made a judgment on the false invoicing behavior, the First Inspection Bureau of Zhoushan City Taxation Bureau of the State Administration of Taxation made a tax processing decision on the false invoicing behavior, and ordered the enterprise involved in the case to make accounting adjustments within a certain period of time. This paper intends to analyze the procedural legitimacy of this case in the interface between tax administrative law enforcement and criminal justice on the basis of sorting out the facts of the case.

I. Case

(I) Facts of the case: false invoicing by shell companies, involving more than 10 billion dollars

During the period from June 3, 2019 to December 31, 2020, Su Mou A, together with Li Mou and Su Mou B, without real goods transactions, utilized six companies, including Company A, which was registered and under their control, to issue VAT invoices from Company B, Company C and other oil refining enterprises, with a total of $5,383,458,288.7 in price and tax and a total of $657,662,244 in tax, and at the same time Utilizing six companies, including Company A, to issue VAT invoices with the name of methyl xylene and other chemical raw materials, with the total price and tax amount of RMB 5,420,169,510.4 and the total tax amount of RMB 668,941,147.4, for the invoice-buying enterprises in Guangdong, Yunnan, Shanghai and other places, and to make profits by charging 1%-2% invoicing fee from them, in the absence of any real goods transaction.

(II) Result: The enterprise involved in the case constituted false invoicing

According to the publicly available information, the case has been decided by the Intermediate People's Court of Jinhua City, Zhejiang Province by the judgment. Based on the facts identified in the judgment, on January 13, 2023, the First Inspection Bureau of Zhoushan City Taxation Bureau of the State Administration of Taxation ordered Company A involved in the case to carry out the adjustment of the relevant accounts in the limited period of time on the basis of the violation of the Measures for the Administration of Invoice in respect of the fraudulent invoicing.

II. The tax authorities can still make a decision on the payment of consumption tax even though the "distribution of matching tickets" has been sentenced to a criminal penalty.

(I) Pattern Analysis: "Matching and Circulation" Invoicing Pattern of Petrochemical False Invoicing

Combined with the publicly available information, this case does not clarify the responsibilities of the upstream refining enterprises, downstream trading enterprises and the enterprises using the invoices, and the charges and penalties of the criminal judgment are not clear. In terms of the invoicing pattern, Company A and other six enterprises involved in the case issued VAT invoices from the upstream oil refining enterprises, and then issued VAT invoices in the name of chemical raw materials to the downstream invoicing enterprises, but the tax authorities did not extend the investigation upstream and downstream, and failed to restore the original appearance of the invoicing chain. As a matter of fact, the pattern of this case is very similar to the circulation of matching invoices in petrochemical invoicing, but the enterprises involved in the case are still at the front end of the invoicing chain. In the case of matching invoice circulation, the upstream refining enterprise obtained input invoices of crude oil and chemical raw materials from the crude oil supplier in compliance, but when selling self-produced refined oil, in order to evade consumption tax, it actually sold refined oil to the involved company and issued VAT invoices with the name of asphalt, heavy liquid paraffin, xylene, jet fuel and other non-taxable consumer goods, and the downstream enterprise obtained invoices of chemical raw materials, and it needed to complete the After obtaining the invoices for chemical raw materials, the downstream enterprises need to complete the activity of changing the invoices and finally issue the fuel oil invoices to the oil-using enterprises. At the same time, there are many over-invoicing enterprises in such cases, and the enterprises involved in the case have the characteristics of over-invoicing enterprises.  

(II) In this case, the tax authorities have the right to make a decision on tax treatment.

First of all, it should be clear that the tax processing decision and tax administrative penalty decision is two independent of each other, the difference between the specific administrative behavior. Tax treatment decision letter of the tax authorities of all kinds of tax violations in accordance with the law, after investigation, hearing, according to the relevant laws, regulations, rules and regulations, to make a decision on tax obligations such as back taxes and other legal instruments, applicable to the tax authorities to the parties to the recovery of taxes, late fees and taxpayers to fulfill their obligations and other circumstances, the "obligations" refers to The "obligation" refers to the legal obligations that the party concerned should have fulfilled instead of additional obligations. The tax authorities impose fines, confiscate the illegal income, confiscate the tools of crime, seize the unused invoices and suspend the supply of invoices, and stop the right to export tax rebate, etc., all of which are the additional obligations imposed on the parties to ensure the fulfillment of the aforementioned legal obligations.

Secondly, according to articles 5 and 21 of the Law on Administration of Tax Collection, the tax authorities are in charge of the administration of tax collection nationwide, and are also responsible for the administration and supervision of the printing, purchase, issuance, acquisition, storage and payment of invoices. In the case where tax evasion or tax resistance constitutes a crime, according to Article 1 of the Circular on the Provisions on the Handling of Tax Evasion and Tax Resistance Cases and the Unification of the Recovery of Taxes by the Tax Authorities for Payment to the Treasury (No. 31 of the Higher Prosecutor's Office [1991]) issued jointly by the Supreme People's Procuratorate, the Supreme People's Court, and the State Administration of Taxation (HSPC [1991] No. 31), "If tax evasion or tax resistance constitutes a crime, the tax shall be paid in accordance with the tax laws and regulations. This part of the tax belongs to a part of the state's leviable tax, and its treatment cannot be treated as general stolen money, and it is not appropriate for the people's procuratorate or the people's court to recover it and turn it over directly to the local treasury, but it should be levied by the tax authorities in accordance with the law and go through the procedure of handing it over to the state treasury". In other words, the tax authorities' performance of tax collection duties and the recovery of taxes in accordance with the law are not affected by the judicial authorities' handling of tax evasion and tax resistance.

(III) In this case, the enterprises changing tickets and refining enterprises should be required to pay the consumption tax.

Under the circulation mode, the enterprises involved in the case essentially detached the invoicing link from the production link, thus helping the upstream refining enterprises to conceal the production and processing behavior and evade the consumption tax obligation, and the social harm of the petrochemical invoicing behavior lies in this. However, in the invoicing chain, the transaction of petrochemical invoicing only changes the name of the product, which can truly record the amount and quantity of the goods and other information, and faithfully reflect the VAT payable in the actual transaction, and will not cause VAT loss of the country, and the parties concerned should not be investigated for the legal responsibility of fraudulent offsetting of VAT. In terms of tax law, the behavior of petrochemical invoice change is a typical taxable behavior. If the invoice-changing enterprise does not make tax declaration or even refuses to declare after notification of declaration, it should also be held administratively liable according to tax arrears and tax evasion. According to Article 1 of the Announcement of the State Administration of Taxation on the Management of Abnormal VAT Deduction Vouchers and Other Relevant Matters (Announcement No. 38 of 2019 of the State Administration of Taxation), the tax law explicitly juxtaposes the term "fraudulent invoicing" with "invoices for non-payment of consumption tax in accordance with the regulations", and does not treat altered invoices as a typical taxable behavior. The tax law clearly juxtaposes "false invoicing" with "non-payment of consumption tax invoices in accordance with the regulations", and does not qualify altered invoices as false invoicing. The criminal law should respect and recognize the characterization of the tax law, even if the enterprise involved in the case is suspected of committing a crime, the tax law does not recognize the false invoicing, the criminal law should not be dealt with according to the false invoicing crime. Combined with the views of judicial authorities, this case should not be treated as the crime of false invoicing, but should be held criminally liable for the crime of tax evasion. If the criminal judgment pursues the criminal liability of the enterprise involved in the case on the basis of the crime of tax evasion, the tax authorities may make a tax treatment decision requiring the enterprise to pay back the consumption tax.

Specifically, according to Article 3 of the Announcement on Relevant Policy Issues Concerning Consumption Tax (State Administration of Taxation Announcement No. 47 of 2012), "the following behaviors of units and individuals other than industrial enterprises are regarded as the production of taxable consumer goods, and consumption tax shall be levied in accordance with the provisions: (a) the purchased non-taxable products of consumption tax will be sold as consumption tax taxable products to the public ......". This document makes it clear that the enterprise changing tickets has the obligation to pay consumption tax and regards the act of change of name as a taxable act of consumption tax, thus changing the obligation to pay consumption tax in the chain of change of tickets from the refining enterprise to the enterprise changing tickets, and plugging the loophole of evasion of consumption tax by change of tickets. Considering the fact that the variable ticket enterprises have small benefits in the transaction chain and are unable to bear high consumption tax obligations, according to Article 1 of the Announcement on Relevant Management Issues after the Cancellation of Two Consumption Tax Approval Matters (Announcement of the State Administration of Taxation No. 39 of 2015), "Taxpayers who continuously produce taxable consumer goods with taxable consumer goods recovered from outsourced purchases, imports or entrusted processing (hereinafter referred to as outsourced taxable consumer goods) as raw materials for the continuous production of taxable consumer goods, is allowed to offset the consumption tax paid on the purchased taxable consumer goods in accordance with the current policy. If it is verified by the competent tax authority that the above purchased taxable consumer goods have not paid consumption tax, the taxpayer shall offset the consumption tax that has been deducted from the consumption tax that is allowed to be deducted in the month of verification". According to this document, if the invoice-changing party did not pay consumption tax, the invoice-using unit which obtained the invoice of refined oil will bear the obligation to pay back consumption tax.

In this case, the tax authorities should first require the variable invoice enterprise to pay the consumption tax in accordance with the State Administration of Taxation Announcement No. 47 of 2012, and if the variable invoice enterprise is unable to bear the burden, then the refining enterprise should be required to pay the consumption tax in accordance with the State Administration of Taxation Announcement No. 39 of 2015.

III. Tax authorities should not continue to impose administrative penalties in this case

(I) Practical Disputes on the Convergence of Execution and Punishment

In the case of the convergence of execution and punishment, the essence of the conflict in the application of procedural law still lies in the realization of legal responsibility and the results of the conflict. Criminal law as the implementation of other sectoral laws to ensure the implementation of the law, in the application of modesty, does not have serious social harm of administrative wrongdoing does not need to be treated as a criminal offense. Citizens, legal persons or other organizations of the same violation of law, both constitute administrative violations, and suspected of crime, the administrative law and criminal law cross-cutting issues. In practice, the administrative organs in the process of investigating and dealing with violations, found that the facts of the violation is suspected of a crime, according to law need to be held criminally liable, there are usually three ways of dealing with: first, only according to the law to give administrative penalties, no longer to the public security organs to transfer; Second, first on the violation of law to give administrative penalties, and then to the public security organs, and then to the public security organs; Third, first to the public security organs according to the law, to be the judiciary to make a final decision on the handling of the decision. then decide whether or not to impose administrative penalties. Of these, with the exception of the first, which is contrary to the law, the other two are controversial in practice.

(II) Procedural rules for the convergence of the administration of justice and criminal justice

This case involves a cross-cutting situation between administrative and criminal cases, and the procedural connection between administrative law enforcement and criminal justice should be properly handled. The Administrative Punishment Law and the Administrative Law Enforcement Organs Referral of Suspected Criminal Cases" clearly defined the procedural rules between the investigation and handling of violations and the pursuit of criminal responsibility: administrative organs in the process of investigation and handling of violations, found that the behavior of the suspected criminals, the case must be transferred to the judicial organs for criminal responsibility, not to administrative penalties in lieu of criminal penalties, a clear linkage between the execution of the criminal criminal priority of the basic principles. After examination, there are criminal facts, the need to pursue criminal responsibility, should be filed; for no criminal facts, or the facts of the crime is significantly minor, do not need to pursue criminal responsibility, but should be held administrative responsibility, the judicial organs should be transferred to the same level of the administrative organs, which shall handle the case according to the law (the specific process is shown in the following chart). It is for this reason that article 27 of the Administrative Penalties Law emphasizes that coordination and cooperation between administrative penalty-imposing organs and judicial organs should be strengthened, a sound system for the transfer of cases should be established, the handover and reception of evidentiary materials should be strengthened, and the mechanism for communicating information on the handling of cases should be improved. 

(III) After the conclusion of criminal proceedings, the tax authorities shall not continue to impose administrative penalties in this case.

On the one hand, according to Article 1 of the Opinions on Strengthening the Convergence of Administrative Law Enforcement and Criminal Justice, if the criminal procedure is finalized and the public security organ withdraws the case, the procuratorate does not prosecute the case, or the court acquits or exempts the taxpayer from the criminal penalty, the tax authority may decide whether to impose administrative penalty in accordance with the law if the taxpayer has violated the law and should be subjected to administrative penalty.

On the other hand, in the case where the criminal procedure has been completed and the taxpayer has been held criminally liable by the judicial authorities, there are two opinions on the question of whether the administrative authorities can impose administrative penalties for the same violation of the law:

One opinion is that, in principle, only one personal or property penalty can be imposed for the same criminal act, and it cannot be applied repeatedly. An act has constituted a crime, the judicial organs to pursue criminal liability, the tax authorities no longer have jurisdiction. That is, the tax administrative penalty measures are absorbed by the criminal law penal measures, administrative penalties and penalties should not be applied side by side.

Another opinion holds that in the case where there is a discrepancy between the judicial authorities and the tax authorities in the determination of the nature of the party's illegal behavior and the amount of the criminal judgment fine is not sufficient to cover the party's underpayment of tax, the tax authorities may impose administrative penalties, provided that the fines that have already been imposed are set off against the administrative penalties. Decision (2018) Yu Xing Shen 2127 is an extension of such a situation: that is, the criminal proceedings only imposed a personal penalty on the person directly responsible for the occurrence of the false opening behavior, but did not impose a fine on the unit. After the judgment, the tax authorities and the unit imposed a fine. Henan Provincial High Court that when an act is different laws provide for different nature of responsibility, it means that the act needs different responsibility to correct, punish or prevent, or the act has caused different legal consequences, need different nature of responsibility to fill, then as long as it is not to assume the same nature of responsibility, should not be considered to be a "one thing more than one penalty ". For the behavior of false VAT invoicing, since the criminal punishment is only a personal punishment and does not involve the punishment of property, it does not affect the administrative punishment to make the property punishment according to the law again, which is not contrary to the principle of "no more punishment for one thing".

We agree with the first opinion, the tax authorities should not have been held criminally liable for the same violation of the administrative penalty. Criminal penalties are the most severe sanctions against the illegal behavior of the parties, should not be mechanically in accordance with the amount of fines, fines to measure whether the punishment is equivalent. In this case, the judgment has been investigated for criminal liability for false opening, the tax authorities continue to make administrative penalties in this case will be lack of legal authorization, violation of legal procedures. To summarize, the tax authorities in this case should not make administrative penalty decisions for the enterprises involved in the case and related enterprises.

IV. Summary

In practice, there are a lot of controversies in tax cases similar to this case. Although some laws, regulations, judicial interpretations and normative documents have already clarified the amount or quantity standard for criminalization of tax-related illegal acts, there is still a lack of corresponding standards for the circumstances and consequences of the illegal acts. Therefore, in the process of investigating and dealing with tax-related illegal cases, it is necessary for the tax authorities and judicial authorities to take the initiative and communicate with each other in a timely manner on the handling of the transferred cases, so as to smooth the procedure of linking up the execution and punishment. In particular, it should be emphasized that the tax authorities should strengthen the examination of the nature of the cases, and those suspected of committing crimes should be transferred to the judicial authorities in accordance with the law, so as to avoid substituting administrative punishment for criminal punishment. For cases that have already been subject to criminal penalties, administrative penalties should no longer be imposed for the same offense, so as to prevent the abuse of the right to impose administrative penalties.