Vat Invoices Analysis And Countermeasures

In 1994 China witnesses the largest reform of its tax system since the establishment of the country, which implements value added tax (VAT) within industrial manufacture areas and wholesale and retail business. In the VAT collection system, the special VAT invoice acts as a vehicle that preserves the VAT chain and plays a crucial role. It features the characteristics of both a payment voucher and a value paper, and therefore catches the attention of certain criminals: They make out false special VAT invoices that bases on no actual goods or service transaction, and provide the invoices to companies for large amount of commission rewards. The companies will then use the false invoices for tax credit. Such behavior has caused the country huge losses in tax revenue, hindered the effective functioning of the VAT internal audit mechanism, weakened the good faith system in tax collection, and incurred a series of other problems.This article first provides a comprehensive description of the VAT system, introducing the computation of tax payable, collection policies and the important status of VAT in fiscal revenues; then summarizes the evolution of the special VAT invoice, analyzing its function in the VAT chain system. It also analyzes, from a legal perspective, the nature, constitutive elements, and content of falsely making out special VAT invoice (the crime).Using case study, this article offers a specific analysis on the situation of falsely making out special VAT invoice in present China, and particularly the characteristics and trend of the crime in the city of Shenzhen. It proposes the innovative argument that the distribution channel of falsely made out special VAT invoices has shaped the features of such crime cases: they are nationally present, but more serious in certain geographic areas and the involved criminal techniques are increasingly diversified and intelligent. The article unveils the severity and harmfulness of falsely making out special VAT invoice, pointing out that the crime not only hurts fiscal revenues, but also gives rise to all sorts of social problems, and challenges the authority of public department execution. From the perspective of social psychology, the article argue that the illegal pecuniary benefit gives taxpayers incentive to follow the crowd in committing the crime, damaging the public consensus of conforming to tax laws and thus negatively affecting the society. The author has brought forth a novel analytic perspective, which places the research on the formation of the crime and the difficulty in fighting it into a broader settings that taking the whole economy development and the cooperation among public departments into consideration Thereby he performs multi-dimensional analysis over the high-incidence of the crime and provides new empirical evidence concerning policy inexecution caused by the profit conflicts among the different departments of government. In order to ensure the reality foundation of the study, the author has reorganized records of cases for which he has participated in investigation, approached the empirical analysis using typical cases in a multi-dimension and multi-layer style, and arrived at factual evidence to help understanding the cause, effect of the crime and the degree of difficulty in controlling it, and to help exploring ways to fight it.To advise on how to control the crime, the last chapter of this article proposes six measures in terms of social integrated management : 1, construct environment that motivates honest tax paying behavior, and facilitate social awareness in promoting and protecting the tax system; 2, strengthen the communication and cooperation among fictional departments, and create prevent-and-punish system for falsely making out special VAT invoice; 3, improve tax system; 4, establish scientific, efficient tax collection system; 5, set up scientific incentive mechanism; 6, create dual penalizing mechanism, which increases punishment for those make out false special VAT invoices and implements strict penalty on those who uses the invoices falsely made. In this way, the fight against the illegal conduct of falsely making out special VAT invoice will become an integrated management that concerns publish administrative departments while not only a simple battle that involves a certain single functional department.