The runaround to evade tax in China

BEIJING • When the accountant at one of the companies I work for as a teacher asked me to evade taxes, she posed it as a challenge.

"See how many fapiao you can bring in," she said. "You're behind a couple thousand."

In China, businesses have to give out invoices called fapiao to ensure that taxes are being paid. But the fapiao - the very mechanism intended to keep businesses honest - is sometimes the key to cheating on taxes.

In China, businesses must issue invoices to ensure taxes are being paid. But as some seek them so as to dodge their own taxes by disguising salary as expenses, shops also try to evade tax by not issuing invoices.
In China, businesses must issue invoices to ensure taxes are being paid. But as some seek them so as to dodge their own taxes by disguising salary as expenses, shops also try to evade tax by not issuing invoices. PHOTO: BLOOMBERG

I wasn't working for some shadowy corporation. I recorded lessons for Chinese students who study English remotely. Though born here, I grew up in the United States and hold an American passport. My presence as a foreigner was better left off the books, the accountant said.

The plan went like this: My company would disguise my salary as a series of expenses, which would also save me from paying personal income tax. But to show proof of expenses, the accountant needed fapiao. It was my responsibility to collect the invoices.

After every meal, every purchase at the mall, every trip to the supermarket, I'd get a receipt and ask the store to print a fapiao based on that.

But evading taxes in China was harder than I expected, because everyone else was trying to evade taxes, too.

Most stores would have fapiao-printing machines, which keep records of the transactions for the tax authorities, but some shops would direct me to another floor or ask me to hold on to the receipts and come back at some arbitrary time.

Though businesses are obligated to give out fapiao, many do not unless customers pester them. They are trying to minimise the paper trail so they, too, can avoid paying taxes on their true income.

Some restaurants tried to buy me off with a can of Coke or Sprite if I would forgo the invoice. But most places just made excuses for why they couldn't hand out the fapiao.

The most common line was that the invoice machine was broken.

So many places had broken machines that I considered becoming a fapiao machine repairman. It seemed like stable work.

Employees at a bakery took down my number and told me someone would call me within a week. No one did. When I went back the following week, the workers acted as if they'd never seen me before and suggested I come back the next week. I went back three more times before finally giving up. They had won.

A maintenance worker for one of China's largest appliance manufacturers told me that the company had run out of invoices for that month. If I wanted one, I'd have to wait and schedule another appointment.

I promised myself I wouldn't let these companies off the hook, but I struggled to keep the timelines straight. When was I supposed to go back to the barbershop? Did the hotpot restaurant say to come back this week or the next?

Plenty of places wouldn't even bother to give me the runaround. They simply refused to print a fapiao. This was illegal, but was I really going to call the tax authority hotline?

I began to see why some people are driven to buy fake invoices. It's not hard; scalpers will sell them on the street, and companies that specialise in printing fake fapiao proliferate.

After a few months, I realised my scheme was flawed. If I spent all my income to generate fapiao to avoid paying taxes on my income, I'd never actually save any money.

To save money and collect enough fapiao, I had to enlist family and friends for help.

A cousin, whose boyfriend had a car, donated a stack of parking invoices. A friend who had bought a fake fapiao to cover her salary slipped me all her legitimate ones.

Soon, the accountant was swimming in invoices. "You're doing a great job," she told me. "Many other teachers are behind."

It seemed everyone was in on it. Both foreign and domestic companies, and even government departments, have been caught cheating.

In 2010, China's National Audit Office found that central government departments were embezzling US$21 million (S$30 million) with fake invoices.

In 2011, an audit of the Beijing-Shanghai high-speed railway construction project found that 16 construction units had entered over US$40 million worth of fake invoices.

Compared with these staggering numbers, the accounting fraud I was asked to perpetrate seemed unambitious.

When I stopped to think about it, I couldn't figure out whether what I was doing was right or wrong. By demanding a fapiao, I was forcing some businesses to pay taxes they would otherwise evade. But all of this was in the service of helping my own company evade taxes. In this strange tale, I was both hero and villain.

To me, tax evasion seemed intractable.

When I went to the office to unload my latest batch of fapiao, the accountant told me that I no longer needed to bring them in. I felt relieved. I could finally stop worrying about when I needed to go back to the hotpot restaurant.

"Thank you for your hard work," she said.

"But what will you do about the taxes?" I asked.

"Don't worry," she told me. "We found another way around them."


• The writer is a freelance writer in Beijing.

A version of this article appeared in the print edition of The Straits Times on September 12, 2015, with the headline 'The runaround to evade tax in China'. Print Edition | Subscribe