Credit card payments diverted to avoid taxes

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.