I. Introduction of the actual case: the invoice "red flush" in the refined oil industry

(i) False opening of refined oil products - 43,000 tons of gasoline "created from nothing"

In March 2022, the Inspection Bureau of Xiantao Municipal Taxation Bureau received a piece of information on a major risk case source passed from the higher level. The information showed that three energy trading companies in Xiantao City, Company F, Company R and Company T, had inconsistent names of goods purchased and sold and were suspected of false invoicing. Inspectors of the three companies associated with the investigation found that there is a company named J company energy trading company and T company for the same address, the same time registered, and its situation is very similar to the above three companies, but also engaged in petroleum and related petrochemical products wholesale business, and there is a discrepancy between purchase and sale of goods and other cases.

Subsequently, the inspectors carefully analyzed the input and output invoice data of the four companies involved in the case using the tax-control system and the invoice backing system, and found that the input invoices of the four companies came from eight petrochemical product companies in Zhoushan, Zhejiang Province, with a total of 2,236 invoices involving 40 kinds of petrochemical products and a total of RMB 190 million. The invoiced companies, on the other hand, were all one company - Wenzhou Y Petrochemical Company (hereinafter referred to as Y Company). The relevant information showed that the four enterprises involved had issued a total of 200 VAT invoices in the quantity of 43,000 tons and the name of No. 92 gasoline to Company Y on January 20, 2022, involving a total amount of 225 million yuan.

Why did these businesses invoice on the same day? The input information shows that the eight upstream enterprises did not sell gasoline goods to the four companies, so how did they issue invoices for oil products? In the tax-control system, the inspectors inquired that an enterprise named Huzhou M Petrochemical Trading Company (hereinafter referred to as Company M) had issued 91 VAT invoices with the name of No. 92 gasoline for the four companies at a similar time. The inspectors verified that after obtaining the invoices issued by M Company, the four enterprises involved in the case promptly issued 200 VAT special invoices with the name of No. 92 gasoline to the downstream enterprises at one time, and after the four enterprises had issued the invoices, this M Company had red-flushed the 91 VAT special invoices previously issued.

After meticulous and sufficient investigation and evidence collection by the case officers, the illegal means and illegal facts of the enterprises involved in the case surfaced: four enterprises involved in the case colluded with their upstream and downstream enterprises, fictionalized the purchase and sale business of oil products, and falsely issued a total of 200 VAT invoices to the downstream enterprises, which involved an amount of 225 million yuan.

(II) Linyi Police cracked the first case of false VAT invoices for refined oil products by using red flush means

On May 28, 2021, the Economic Investigation Brigade of Linyi County Public Security Bureau successfully cracked the "1.13" case of false VAT invoices, which is the first case of false VAT invoices of refined oil products using red flush means in Texas.

After investigation, from November 2020 to January 2021, Nie and others controlled a shell company such as Shandong Biofuel Co., Ltd. and used technical means to obtain a small amount of refined oil inventory, and then utilized the red flush means to greatly inflate the amount of refined oil inventory, and then externally falsely issued VAT invoices for refined oil products, which resulted in a huge loss of national tax. The case involves more than 60 enterprises in 11 provinces such as Shandong, Guizhou and Jiangsu. The task force carried out a centralized operation to close the net after the study and judgment, knocked down two criminal gangs of false invoicing, and arrested 13 criminal suspects. The successful detection of the case avoided the loss of national tax money in time, and strongly combated and deterred the arrogance of tax-related criminals.

Secondly, the purpose behind the use of "red punch" means of false invoicing by refined oil enterprises

(i) Traditional methods of changing tickets for evasion of excise duty

The foregoing are all cases in the refined oil products industry that use red flush means to inflate inventory data to achieve the effect of consumption tax evasion, and the analysis of its principles cannot be separated from the discussion of tax-related risks in the petrochemical industry and its changes. China's refined oil industry is basically in a monopolized situation in raw materials and sales, and refining enterprises have less say in pricing in the refined oil industry, which leads to their disadvantages in the process of refining products competition, such as low productivity and production capacity, insufficient raw material resources, and they may face loss of money if they pay excise tax, so a small number of refining enterprises evade excise tax in order to obtain profits, which is a long-standing problem. The problem has a long history.

Before the on-line of Golden Tax Phase III and refined oil products module, as far as the traditional way of evading consumption tax is concerned, the first is to turn the production behavior into pure trade behavior, which can be changed from the front-end or the back-end, such as purchasing crude oil, obtaining gasoline invoices through the change of invoices and then issuing gasoline invoices to the outside world, so that the accounts show the trade behavior rather than the production behavior in order to evade the consumption tax; the second is to change the production behavior of consuming raw materials without tax into the consumption behavior of consuming raw materials with tax, which is mainly changed from the front-end to the fuel oil or naphtha invoices. The second is to change the production behavior of using raw materials without tax into the production behavior of using raw materials with tax, which is used to offset the consumption tax, mainly from the front-end to change the invoice, such as changing the invoice of crude oil into the invoice of fuel oil or naphtha, and then issuing gasoline invoice to the outside world, thus offsetting the consumption tax contained in the fuel oil or naphtha.

(ii) New modes of ticket variation have emerged after the launch of the refined petroleum products module

In order to fundamentally prevent petrochemical trading enterprises from changing their invoices, the State Administration of Taxation (SAT) issued the Announcement on Relevant Issues Concerning the Collection and Management of Consumption Tax on Refined Products (SAT Announcement No. 1 of 2018) in January 2018, and formally went online with the Refined Products Oil Invoice Module system in March 2018.The Refined Products Oil Invoice Module is a new system for the trading and production enterprises. The refined oil invoice module imposes significant restrictions and norms on the use of refined oil invoices by trading enterprises and production enterprises. For trading enterprises, it is a restriction on inputs and outputs, i.e. how much refined oil inventory is in the module before how much refined oil invoices can be issued in the module, thus restricting trading enterprises from arbitrarily changing their names. For refining enterprises, it is a deduction restriction, i.e., how much refined oil stock in the module can deduct how much consumption tax, but there is no restriction on refining enterprises to change their names. However, the fundamental problem of monopoly in the refined oil market will persist, and the need for refiners to cut costs will always be there.

Based on this, the invoice crime in the petrochemical industry will not disappear, and there are many new modes of invoicing, such as the use of historical legacy of false inventories of foreign invoicing, forged customs import payment book of refined products to inflate the inventory of invoicing, commissioned the processing of invoicing of tax arrears, the use of refined products invoices red punch time difference in foreign invoicing, gas station invoices of the surplus back to refineries, and so on. Among them, the use of refined oil invoice red punch time difference external invoicing is the main discussion of this paper is a new type of variable invoicing mode.

(iii) How does the red flush model take advantage of time differences to inflate the inventory of the refined oil products module?

Example: A trading company has 50,000 tons of inventory, and issues a VAT invoice of 50,000 tons with the name of "Gasoline 95#" to B trading company, and B company writes 50,000 tons of inventory in its refined oil module after obtaining the invoice. Company B initiates the issuance of red special invoice by Company A. Company A "red flushes" the price and tax according to the original invoice, and Company A restores 50,000 tons of inventory. In this way, the 50,000 tons of inventory is returned to Company A and remains in Company B at the same time through red flushing.

After Company B has 50,000 tons of inventory in the refined oil module, it can issue VAT invoices with the name of "Gasoline 95#". In order to solve the problem of insufficient VAT input tax, Company B usually inflates VAT invoices with the name of "dimethylbenzene" and other chemical products. Since the refined oil module is not connected to the input module, after making up the input, Company B can sell to Company C and transfer 50,000 tons of inventory to Company C, which can issue invoices for "Gasoline 95#" after distribution. In the above model, company A through the red flush means to let the refined oil inventory data continuously flow sale, to be red flushed after company A's input and refined oil inventory recovery, and then cycle of external invoicing and then red flush. In summary, the principle of the red-flush mode is that the invoice-changing gangs take advantage of the time difference and information difference between the refined oil module and the tax-control system to inflate the inventory data.

Third, to what areas do invoices issued using red flushing to inflate inventory go?

By analyzing the case of red-flush type of false invoicing and the related principles, it can be seen that its essence is the evasion of consumption tax. It needs to be clear that the subject of consumption tax evasion is essentially the invoice-using organization. According to Huatax's observation, most of the invoices of refined oil inventory red-flushed will not flow directly to the two barrels of oil and other main organizations, nor will they flow to the larger private local refineries, but often flow to the smaller oil transfer enterprises or trading enterprises with the ability to transfer oil. These enterprises actually do not have formal refined oil production procedures, refining qualifications, and at the same time have the ability to transfer oil and hazardous chemicals production qualifications.

Why do such enterprises need refined oil stock invoices? The reason is that they often purchase gasoline and diesel fuel components without consumption tax, obtain chemical invoices issued by upstream suppliers, and sell them to the public for profit by renting tanks and implementing physical blending to blend the component oils into refined products. Specifically, from the process point of view, iso-octane, MTBE, mixed aromatics, naphtha, xylene and other component oils can not be directly used as automotive fuel, but after a simple physical blend can be obtained in line with the National IV or even the National V standard gasoline, refined oil storage enterprises nominally to provide warehousing services, but the leased tanks of the refined oil trading enterprises are essentially engaged in the oil blending business. Therefore, from the viewpoint of the whole industry chain, the trading enterprise that implements the red punch's "pouring ticket" behavior is essentially facilitating the downstream oil blenders to evade the consumption tax, and from the viewpoint of subjective-objective consistency of the criminal law, it is actually aiding the tax evasion behavior. How should this type of behavior be evaluated in criminal law?

Fourth, for the "red punch" type of false invoicing of all kinds of subjects, how should be characterized?

(i) Based on the principle of subjective-objective consistency, it is not appropriate to recognize the crime of falsely issuing VAT invoices.

Through the analysis of the above transaction chain, it can be found that the social harm of the "red flush" behavior focuses on the evasion of consumption tax and has nothing to do with value-added tax. The downstream oil transfer enterprises usually do not lack input credit, and the upstream enterprises purchasing component oils will issue chemical invoices. The purpose of downstream purchasing invoices is not to offset VAT, but to obtain the inventory data of refined oil products, which essentially means that the subjects of the transaction chain do not seek VAT cheating benefits, but the benefits of consumption tax evasion. China's VAT adopts the input and output tax deduction method, in the above transaction, each participating enterprise declared VAT in accordance with the law, and the input tax deducted in the next link, i.e., the output tax paid in the previous link, and all the value-added generated in the oil circulation link were dispersed to the enterprises to be recognized and declared for tax payment, and the purpose of this kind of transaction was not to offset the VAT payment falsely. In other words, the use of false inputs to offset false outputs does not, in essence, result in a loss of VAT for the State. Therefore, based on the principle of subjective and objective consistency, it is not appropriate to recognize the subject of "red flush" type of false invoicing as a crime of false VAT invoicing.

(ii) Red punch enterprises help downstream oil blenders to evade excise tax, which is an aiding and abetting offense of tax evasion

For the downstream trading enterprises or production enterprises engaged in oil transfer business with tickets, it is a typical tax evasion offense because they have not declared consumption tax in accordance with the law due to the occurrence of consumption tax taxable behavior.

For upstream suppliers selling gasoline and diesel components, the Ministry of Finance and the State Administration of Taxation Announcement No. 11 of 2023 stipulates that consumption tax is levied on alkylated oils (iso-octane) in accordance with gasoline; petroleum ether, crude white oil, light white oil, and some industrial white oils (No. 5, No. 7, No. 10, No. 15, No. 22, No. 32, and No. 46) in accordance with solvent oils; and mixed aromatics, heavy aromatics, Mixed aromatic hydrocarbons, heavy aromatic hydrocarbons, mixed carbon 8, stabilized light hydrocarbons, light oil and light coal tar are subject to consumption tax according to naphtha. Therefore, the upstream suppliers who sold the component oils in this type of case are also the subject of consumption tax evasion.

For the enterprise that utilizes the red flush means to inflate the inventory data of refined oil products, it is helping the downstream oil mixer to evade the consumption tax, which belongs to the helper of the tax evasion crime, and it is more appropriate to deal with it according to the tax evasion crime. Meanwhile, it is necessary to draw attention to the fact that, for the enterprises of oil blenders, if they falsely open the surplus chemicals to the outside world for profit, the part of the invoices obtained constitutes the crime of tax evasion, and the part of the chemical invoices falsely opened to the outside world for profit should be dealt with in accordance with the crime of falsely opening the VAT special invoices.

V. Conclusion

By observing the actual cases of invoice "red flush" in the refined oil industry mentioned above, we can find that the public security authorities have dealt with them in accordance with the crime of false invoicing, characterizing the red-flush enterprises as the main body of false invoicing and failing to trace the downstream enterprises such as oil blenders. Will this kind of investigation and handling create many problems and inconsistencies? The answer is yes. First, the characterization of the public security and the objective facts there is a deviation, for the use of red flushing means to inflate the inventory data of refined oil products enterprises, in fact, to help the downstream evasion of consumption tax, belonging to the crime of tax evasion to help offenders. Secondly, the problem of consumption tax evasion cannot be fundamentally solved without a full-chain crackdown on the downstream. In order to seize economic benefits, downstream oil blenders will constantly look for new red-flush enterprises to issue false invoices and then dispense goods for external sales. Thirdly, neglecting to investigate and deal with downstream consumption tax evasion is not conducive to fundamentally safeguarding national tax revenue. If only to false invoicing investigation and punishment, the result is nothing more than confiscation of illegal income, which is the result of local in order to increase fiscal revenue is happy to see, but the whole chain of no subject to pay consumption tax, how to protect the interests of the state? Only the whole chain to combat crime, and identify the downstream oil blenders and other enterprises of the main evasion of consumption tax responsibility, in order to allow the judiciary to recognize the root of the problem, and then realize the real protection of national interests.