Credit card payments diverted to avoid taxes

PUBLISHED : Friday, 18 March, 2011, 12:00am
UPDATED : Friday, 18 March, 2011, 12:00am

Taiwanese authorities are investigating a fraudulent payment method that involves operators illegally forwarding mainland visitors' credit card spending records to the mainland, bypassing the island's tax department and the credit card settlement centre.

Three Taiwanese companies allegedly deprived the island of at least NT$700 million (HK$184.5 million) in tax revenue in the past 21/2 years, judicial officials said yesterday.

They suspect the amount was much greater because further evidence showed that up to 40 local shops and companies used the same method to evade taxes.

On Wednesday, more than three dozen police officers and Investigation Bureau agents searched the offices and homes of eight people accused of violating business sales and profit regulations, the officials said.

Prosecutors later questioned three people suspected of providing the network for the three companies - a travel agency and two jewellery stores frequented by mainland tourists. They also interviewed five owners and employees of the three companies using the payment network, the officials said.

Wang Hsin-chien, of the Taipei Prosecutors Office, said the group was suspected of either supplying or using ChinaPay credit card readers in three stores, which directly hooked up with the mainland payment centre, skipping legal requirements to go through Taiwan's National Credit Card Centre.

ChinaPay, the online payment subsidiary of China UnionPay - a mainland government-backed inter-bank transfer network and credit card issuer - provides online payment, banking, and brokerage services. It is a payment gateway that is widely used on the mainland, especially for UnionPay credit cards.

The three suppliers, identified as Liao Wen-hui, Teng Chang-nien and his brother Teng Sung-nien, operated a payment network company which shared the same name with Easylink Payment Network, which operates in Hong Kong and Guangzhou, Wang said.

'We questioned three major suspects over their alleged roles in the illicit operation and released them on bail ranging from NT$60,000 to NT$300,000 late on Wednesday night,' Wang said.

He said the operators of the three stores were suspected of installing the ChinaPay credit cards readers to charge mainland visitors using UnionPay credit cards. Because those credit card readers did not link to Taiwan's credit card handling centre, operators could evade sales tax and business profits tax, Wang said.

Investigators said they found that Taiwan's Easylink had handled more than NT$2 billion worth of spending by UnionPay credit card users since May 2008. Taiwan's Easylink was given 4 per cent as a 'service charge' through Hong Kong's Easylink.

They said up to 40 Taiwanese stores were believed to have used the illegal payment network to evade taxes, and they were launching investigations into their alleged illegal operations.

Fraud scheme

Three Taiwanese companies are alleged to have cheated the island out of tax revenue, in NT dollars, totalling: $700m