Several major seafood firms in southern China appear to be caught up in a crackdown on tax evasion.
The investigation is centered around some well-known names in the Chinese seafood sector in Guangdong province, with customers also helping Chinese police and tax authorities with their inquiries, according to a China-based seafood trader shipping seafood to international buyers.
The trader, who has been a reliable source of information on the Chinese market in the past, said Chinese authorities appear to be looking at false declarations and undervaluation of the value of shipments by companies seeking to save on tax bills. That could have involved fraud on invoices for exports and imports by seafood firms, according to the course.
“We were contacted by the authorities in Guangdong asking a representative from our company to travel to Guangzhou with the records of our purchases [from the company being investigated], before the staff member was allowed return to his office,” the source told SeafoodSource.
Files relating to the purchases of over 3,000 containers of seafood were examined by the Chinese investigators in Guangzhou, where many shrimp and tilapia exporters are located, the source said. Several large companies processing and exporting tilapia have had to stop operations while the investigation is underway, the executive told SeafoodSource.
“This is a large headache for us because we’ve had to find alternative supplies for our client,” the source said. “Nobody knows when the companies under investigation will be allowed to resume operations.”
Chinese police may have been alerted to tax evasion allegations by overseas authorities cooperating with China to detect fraudulent declarations by importers of seafood, the source said.
“China has a data-sharing relationship with Chile, whereby data entered by Chilean customs is accessible in real time to the Chinese and vice versa. This prevents cheating,” the executive said. His account tallies with an account from another trading company located on the East coast which has also been contacted by Guangdong authorities seeking details of invoices for containers purchased from seafood firms in the latter province.
Fake invoicing on exports has been used in the past to circumvent China’s strict controls on exit of capital. The U.K. recently paid a USD 2.8 billion (EUR 2.57 billion) fine to the European Union for what Brussels deemed as a failure to prevent undervaluation fraud involving imports of Chinese textiles and footwear then sold on the European market.
Faced with a slowing economy and tighter fiscal situation, China has initiated efforts to tighten collection of taxes. China’s seafood imports totaled 4.1 million tons in 2022, worth USD 18.7 billion (EUR 17.2 billion), up 22 percent by volume and 35 percent in value from 2021.
The executive said the company’s role in providing information for the investigation went smoothly due to its willingness to provide full transparency to the authorities into its business dealings.
“Once our staff were contacted by Guangdong authorities, I said we’ll cooperate completely,” the source said. “Our staff member who took the documents to Guangzhou was treated very nicely. His hotel was booked for him and he was taken to the airport the following day for his return flight. I am really glad we had nothing to hide.”
Photo courtesy of Adamlee01/Shutterstock
