How were 70 customs and tax officials implicated in the scandal?

Of the 122 defendants prosecuted in three recent economic cases, 70 were former customs or tax officials.

The Khanh Binh Border Customs Sub-department, where dozens of leaders and officials colluded with businesses to embezzle hundreds of billions of VND in VAT refunds. Photo: N. Duc.

In March and May 2016, the Supreme People's Procuracy and the Ho Chi Minh City People's Procuracy completed indictments for three cases of fraud involving the misappropriation of hundreds of billions of VND in value-added tax (VAT) refunds that occurred in Ho Chi Minh City, An Giang, and several other provinces and cities.

Of the 122 defendants prosecuted in the three cases, 70 were former officials and leaders of the Khanh Binh Border Gate Customs Sub-department (An Giang), Ho Chi Minh City Customs officials, tax officials, etc.

Three familiar tricks

According to a leader of the Investigation Agency of the Ministry of Public Security, businesses often employ three tactics to embezzle VAT refund money.

Firstly, businesses are established in Cambodia and Vietnam, and then these businesses sign foreign trade contracts with each other to export goods from Vietnam to Cambodia. Secondly, the businesses use the legal entity of the business established in Vietnam to purchase fictitious invoices to legitimize input costs. Thirdly, payment documents for foreign trade contracts are fabricated by creating documents showing money being transferred from Cambodia to Vietnam and making payments from the current account of the company in Cambodia to companies in Vietnam.

Subsequently, these businesses colluded with customs and tax officials to create export documents for Cambodia that showed quantities of goods many times higher than the actual amount exported…

For example, in the case of Le Thi Chi and her accomplices, the Supreme People's Procuratorate issued an indictment prosecuting 52 defendants for crimes including fraud and appropriation of property; illegal trading of invoices; and abuse of power and authority while performing official duties. Among the defendants, 34 were former leaders and officials of the Khanh Binh Border Gate Customs Sub-Department (An Giang).

From May 2011 to March 2013, Le Thi Chi (An Giang, director of Kim Chi Import-Export Co., Ltd.) and her accomplices used the legal entities of Kim Chi Company, Phuong Phuong Tung Company, and Dan Thanh Do Enterprise to illegally buy and sell 2,381 VAT invoices with many businesses in An Giang and Ho Chi Minh City. The amount of money falsely recorded on these invoices was over 400 billion VND.

With invoices and payment documents for purchased goods, Chi colluded with two companies in Cambodia to create fictitious export contracts for items such as mobile phones, household appliances, and flour, with a total value of over 400 billion VND recorded on the invoices. She then submitted applications for VAT refunds. In total, Chi received nearly 42 billion VND in VAT refunds from the state budget.

Customs officials provided crucial assistance.

To successfully evade taxes, Chi colluded with Mr. Nguyen Thanh Tri, the head of the Khanh Binh Border Gate Customs Sub-Department from 2008 to August 2012, and his successor, Mr. Nguyen Van Bien (the head from 2012 to October 2013). Mr. Tri and Mr. Bien instructed their subordinates to falsely certify export declarations for Chi's companies and accomplices. In return, Chi agreed to pay the customs authorities 200,000 VND per export declaration and 0.3% of the value of the goods recorded on the export customs declaration.

According to Mr. Tri's instructions, the daily "tips" received from Chi were collected by the shift team leader and divided among them as follows: the head of the sub-department received 40%, the deputy head 12%, and the team leader and three other officers on duty each received 12%. In addition, Mr. Tri also received separate tips from Chi three times, totaling 15 million VND.

The prosecuting authorities determined that from 2010 to 2013, 34 leaders and officials of the Khanh Binh Border Gate Customs Sub-department processed and falsely certified hundreds of export declarations with fictitious quantities and goods stamps, receiving nearly 1.7 billion VND in illicit gains. Of this amount, Mr. Tri benefited 356 million VND; Mr. Bien benefited 261 million VND…

Tax officials know it's wrong but still do it.

In September 2013, following a request from the General Department of Taxation, Ministry of Finance, the General Department of Security, Ministry of Public Security, received files regarding numerous individuals in the Southwestern provinces establishing "ghost" businesses to buy and sell VAT invoices in order to fraudulently obtain tax refunds from the State.

Through investigation, authorities determined that Pham Thanh Dung established the companies Tan Thanh Loi, Tan Loi Kim, and Tan Thanh Loi An Phu in Khanh An commune, An Phu district (An Giang province) to carry out illegal activities. Dung purchased 2,076 fraudulent invoices from various domestic businesses and used these invoices from the three businesses he established to create fake documents and records, then forged foreign trade contracts and export documents. With the assistance of many customs and tax officials, Dung embezzled 45.4 billion VND in taxes.

For each tax refund application, Pham Thanh Dung gave Mr. T.D.D. (Deputy Director of the An Giang Provincial Tax Department - who passed away in 2013) 40 million VND; and gave Mr. Nguyen Thanh Tung - former head of the Tax Declaration and Accounting Department of An Giang province - 8 million VND. Many other officials of the An Giang Provincial Tax Department also received money from Dung to process tax refunds for Tan Thanh Loi Company totaling nearly 24 billion VND.

Similarly, for each tax refund application, Dung paid 20 million VND to Mr. Vo Thanh Ngoan, Deputy Head of the An Phu District Tax Department, An Giang province, and gave gifts and envelopes containing 5 million VND to Mr. Duong Hoang Yen, Head of the An Phu District Tax Department. From August 2012 to April 2013, Mr. Yen and Mr. Ngoan approved 20 tax refunds for Dung's two companies, totaling over 90 billion VND.

Notably, in this case, many customs officers at the Khanh Binh border gate in An Giang province were implicated for accepting money from companies headed by Pham Thanh Dung, at a rate of 0.3% of the total export value per export declaration…

According to PLO