Fake invoice industry continues to thrive

PUBLISHED : Wednesday, 28 October, 2009, 12:00am
UPDATED : Wednesday, 28 October, 2009, 12:00am

Police who spent three months trying to wipe out cells producing fake invoices say they unearthed an enormous and sophisticated hidden industry.

Zhang Tao, deputy director of the Ministry of Public Security's economic crime investigation department, said yesterday that the fake invoice business had thrived in recent years despite continued government efforts to suppress it.

The police confiscated more than 80 million copies of counterfeit invoices in the first 10 months of this year, nearly double the record number for all of last year, Zhang said.

The absence of auditing in the business sector on the mainland has made fake invoices a convenient tool to evade paying taxes, claim larger government export subsidies or bury evidence of corruption.

Zhang said the construction and transport sectors had the biggest demand for fake invoices. Police seized large quantities of them in some national building projects, including railways, expressways and large bridge projects.

Eight companies, for instance, had teamed up and inserted more than 1,000 copies of fake invoices in their financial records to inflate costs and write off more than 1 million yuan (HK$1.14 million) in value-added tax.

Zhang admitted that government agencies were another huge buyer, with the government of one city in Henan purchasing nearly one-fifth of the fake invoices sold on the local black market, with a total face value of 300 million yuan. He did not reveal the name of the city.

This month Guangzhou police busted a counterfeit invoice production cell that was part of a nationwide sales network masterminded by a Zhejiang family and confiscated more than two million invoices, worth 100 billion yuan.

Fake invoice suppliers had adopted new business models to meet growing demand and escape police raids, Zhang said. Wholesalers had built more than 4,000 websites and sent more than seven million text advertisements to cellphone users.

Yuan Chunfeng, an auditor for the Auditing Bureau in Zibo, Shandong, said that fake invoices could be detected easily by a competent accountant. But real invoices, used to make bogus claims, were 'the real challenge'.



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