China integrates tax investigations

The Beijing State Administration of Taxation announced the launch of the “Golden Taxation Project” which will link up Value Added Tax verification and investigation computer systems across the country at the beginning of the year. The aim is to implement a clampdown on VAT-rebate fraud by introducing a standardised nationwide VAT invoice system for all sales above 10,000 yuan. Hand-written invoices for sums greater than 10,000 yuan will cease to be accepted as evidence of sales for VAT rebate purposes from 1 April 2002 and all such invoices will no longer be accepted from 1 April 2003. The Golden Tax Project went live in four cities (Beijing, Shanghai, Tianjin and Chongqing) and five provinces (Liaoning, Shandong, Jiangsu, Zhejiang and Guangdong) on January 1, 2001. It will be rolled out to 22 other provinces on 1 July when the authorities expect a national VAT monitoring system to be in place. Reports of a huge export tax rebate fraud, worth up to 100 billion yuan (US$20 billion), centring on the cities of Chaoyang and Puning in Guangdong, also emerged in the Hong Kong press last month. Local party officials and members of the tax and customs departments were detained in connection with the alleged artificial inflation of product values by as much as 20 or 30 times as well as claims from bogus companies for fictional transactions backed by false export documents. China instituted approaching full export tax rebates in a bid to boost foreign earnings in the wake of the Asian crisis in 1997.