China cracks down on invoice fraud

Police in China have arrested more than 5,000 people in a crackdown against invoice fraud, the official news agency Xinhua reported.

In a national campaign that lasted for 10 months, police shut down 1,045 sites which were producing fake business invoices. They also arrested 5,134 people and seized more than 80 million fake invoices, according to Wu Heping, a spokesman for China’s Ministry of Public Security. An additional 540 people were also arrested and charged with tax evasion and fraud by submitting fake invoices to tax authorities, Mr Wu said.

In China, it is common for people and companies to purchase such fake invoices off vendors. They are then passed off as real expenses when submitting tax return to authorities, thereby lowering tax liabilities. Mr Wu also said that use of fake invoices was also linked to other illegal activities, such as smuggling, money laundering, and other forms of corruption.

Mr Wu said the problem was especially prevalent in Guangdong Province, where more than 35 per cent of the fake invoices were seized.

He also said that fake invoices were most commonly used in the catering and retail industries, accounting for 51 per cent of the number of fake invoices confiscated in the crackdown. However, he added that it was also a problem in the construction and transportation sectors, because the sums involved led to bigger tax losses.

More than 18 per cent of the invoices were sold to local government and government sponsored bodies, Mr Wu added.