Nanjing customs officials have arrested eight suspects accused of taking advantage of a tax-free scheme near the Chinese border to smuggle 510 million yuan (HK$641 million) worth of goods.
Residents living within 20 kilometres of China’s borders are allowed to purchase up to 8,000 yuan worth of goods a day – free of taxes and tariffs – in government-designated marketplaces, according to trade pacts with neighbouring countries including Vietnam, Laos and Myanmar.
These are called cross-border barter transactions.
Residents need a special government-issued permit, in the form of an ID, that certifies that they live close to the border and are thus eligible for the tax breaks.
However, the eight suspects allegedly collected 1,000 IDs and used them for a series of transactions at the tax-free marketplaces, saving them millions of yuan, according to a report by news site thepaper.cn on Thursday.
One of the suspects owned a Nanjing-based trade company that is accused of evading more than 110 million yuan in taxes since 2012 by using the scheme.
The company allegedly ordered agricultural products from Ukraine and India, which were shipped to a Vietnamese port, then it smuggled the products into China through the barter transactions with the help of a group of smugglers who had the IDs, according to the report.
The bartert case marks a new form of smuggling, which is lucrative as it cuts transaction costs by at least 50 per cent, according to a deputy director at Nanjing customs.
In one case, importing one tonne of peanuts cost 1,600 yuan with tariffs and value-added tax. But the company only needed to pay the smuggling group 710 yuan to import products through barter transactions, the report says.
The Nanjing company allegedly smuggled nearly 100,000 tonnes of agricultural products between July 2012 and March this year.
The report quoted the Nanjing customs authority as saying some of the illegal deals could cause safety concerns. A cache of peanuts imported by the Nanjing firm were mouldy, but were still sold to a food processing company, which may or may not have sold it in the market.
An investigation is under way.