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Convicted of bribing doctors with fraudulent invoices, what can be done about tax compliance under the anti-corruption pressures?

Nov. 16, 2023, 8:57 p.m.
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For a long time, the pharmaceutical industry has raised the price of drugs due to potential corruption, which has given rise to a large number of false invoicing and tax evasion. For this reason, the state has repeatedly deepened the reform of the pharmaceutical system, the implementation of the "two vote system" "one vote system", in order to reduce the price of medicines, and to put an end to the bribery and corruption of medicine and other issues. Over the past few years, the state's multi-departmental joint rectification of unethical practices in the field of medicine has been normalized, and to a certain extent, it has cracked down on tax violations. But the phenomenon of bribing doctors by means of false invoicing and other means still exists. Recently, the relevant departments deployed to rectify the problem of corruption in the field of medicine, it can be seen that the pharmaceutical industry will be the state focus on regulating the industry. In view of this, this paper starts from a real case of bribing doctors through false invoicing, combines relevant policies, reveals the tax risk points of the pharmaceutical industry, and provides a tax compliance program for the pharmaceutical industry under the high pressure of anti-corruption.

I. Case: false invoices only to bribe doctors, the perpetrator was sentenced to imprisonment

(I) Basic case: falsely issued 2.2 million promissory notes for bribes

During the period from July 26, 2017 to June 8, 2018, the defendant Ni Mou set up a pharmaceutical company in Hangzhou, and at the same time borrowed the identity of the company's employees and friends and relatives to register 2 consulting service companies and 39 sole proprietorships, which 39 sole proprietorships are small-scale taxpayers to enjoy the tax incentives for approved levies of 1.5% Since 2017, Ni Mou in the pharmaceutical company contracted a certain region of the drug After the promotion business, respectively, a pharmaceutical company in Hangzhou, 2 consulting service companies and 39 individual sole proprietorship enterprises and pharmaceutical companies to sign a drug promotion contract, and then, the business will be subcontracted to the defendant Lu Mou and other pharmaceutical representatives or the next subcontractor and earn the promotion fee of 5%-10% of the profit, and when subcontracted to the individual, and then deducted from it the invoice amount of 5% of the tax. Ni Mou in order to reduce the enterprise tax of the 2 companies, the use of 39 individual sole proprietor approved levy policy, forged contracts and individual sole proprietor enterprises to carry out false transactions, so as to various names will be transferred to the two companies of the pharmaceutical company's promotional fees transferred to by the individual sole proprietor enterprises, by the individual sole proprietor enterprises to false invoices to the 2 companies, the price of the invoices issued by the price and tax of a total of 2.2 million was 2 companies as the cost of the cost of the pre-tax expenses.

After obtaining the promotion fee at Ni, Lu Mou to increase sales, promised to pay 8 yuan per prescription of a certain injection to the standard of the benefit fee to the prescribing doctor, the relevant doctors to be promised, during the period of a total of 40 doctors such as Liu Mou (handled separately) benefits totaling more than 880,000 yuan.

(II) Risk disclosure: extremely high risk of commercial corruption in a buyer's market

In the above case, the court convicted and sentenced Ni for the crime of fraudulent invoicing, Lu for the crime of bribery of a non-State functionary, and in a separate case, the doctor concerned for the crime of bribery of a non-State functionary. It can be seen from this that Lu, as a pharmaceutical representative, received a favor fee from the pharmaceutical company, which was used as a motive for the crime to bribe the doctor so as to obtain a higher sales volume.

In practice, there are also pharmaceutical representatives to make undue profits, the first pharmaceutical enterprises to negotiate, in its name to the pharmaceutical company to buy drugs, and then through the establishment of shell companies, fictitious transactions and false invoicing way to raise the price of drugs sold to the hospital, and finally will get the undue benefits to the pharmaceutical enterprises, the hospital personnel.

(III) Summary: false driving is more strongly associated with commercial bribery and bribery

Drugs, medical devices, etc. is different from other commodities, the government regulatory authorities on its supervision is more stringent, its sales need to hospitals and other medical institutions endorsement, at the same time, the circulation of drugs, distribution model prompted the pharmaceutical companies in order to expand the sales tend to give doctors and other relevant personnel interests, breeding ground for bribery, in order to bribe doctors and other relevant personnel, pharmaceutical companies, pharmaceutical companies, medical representatives, etc. through the way of the fraudulent invoices will be the bribery Funds out of the set, in the published referee cases can also be seen, the doctor bribed to be investigated, often implicated in the case of false invoicing, false invoicing cases by the tax audit or transferred to the public security, bribery cases will also be rooted up.

II. Policy: Strict crackdown on corruption in the pharmaceutical industry and nationwide focus on medical care

(I) Mobilization of the Central Commission for Discipline Inspection and the National Supervisory Commission to focus on corruption in the pharmaceutical sector

In May of this year, fourteen ministries and commissions jointly issued a report on the rectification and correction of malpractices in the medical field related to the collection of red packet kickbacks, tax-related violations, etc.; at the beginning of July, the Commission on Health and Wellness, together with the Ministry of Public Security and other departments, jointly convened a video conference to deploy a one-year centralized rectification of corruption in the medical field across the country, and the National Supervisory Commission of the CCDI was involved in both meetings.At the end of July, the National Supervisory Commission of the CCDI convened a mobilization meeting to deploy the disciplinary inspection and supervisory organs to cooperate in carrying out the national anti-corruption issues in the field of medicine to focus on remediation, the meeting clearly pointed out that it is necessary to increase law enforcement efforts, focus on investigating and dealing with a number of cases of corruption in the field of medicine, the whole field, the whole chain, the whole coverage of governance of the pharmaceutical industry, which marks the comprehensive and in-depth involvement of discipline inspection and supervision in all parts of the country in rectifying the problem of corruption in the field of medicine, and it will be a severe crackdown on corruption in the field of medicine.

(II) Hubei Provincial Commission for Discipline Inspection and Supervision held a meeting to fully cooperate in the rectification of pharmaceutical corruption

Hubei Provincial Commission for Discipline Inspection and Supervision held the province's discipline inspection and supervisory organs to cooperate with the pharmaceutical field of corruption focused on remediation work mobilization and deployment of the video conference, the meeting clearly pointed out that, based on the functions and responsibilities, adhere to the bribery together with the investigation, all efforts to focus on cooperation to carry out the pharmaceutical field of corruption remediation. Visible, in the central deployment, there will be more provinces of the discipline inspection and supervision commission of the pharmaceutical field anti-corruption issues to make work deployment.

(III) Zhejiang Province Health issued "special emergency" documents, held a meeting to rectify medical corruption

Zhejiang Provincial Health Commission issued a "special emergency" document to convene the province's pharmaceutical field of corruption in the centralized rectification of the work of the video conference, the requirements of strict investigation of the medical hospital bribery crimes, covering the hospitals affiliated with universities, pharmaceutical companies. This shows that Zhejiang Province has also begun the work of corruption in the field of medicine rectification.

(IV) Guangxi hospitals to carry out the work of clearing unreasonable remuneration

Driven by the high pressure of anti-corruption, Guangxi People's Medicine carries out self-checking work, requiring hospital personnel to take the initiative to return the training fees received, seminar fees and other unreasonable remuneration, red packets and kickbacks given by the relevant personnel in the pharmaceutical industry in the form of various forms in the name of. In the anti-corruption storm swept the pharmaceutical industry at the same time, is bound to implicate the pharmaceutical industry tax violations. 

III. Tax Risks: An Inventory of Common Risks in the Pharmaceutical Industry

(I) Tax risk of tax evasion in pharmaceutical enterprises

First, practical case: a pharmaceutical company in Dalian has not declared its income on the tax return since 2016, and after the tax audit conducted by the Dalian Tax Inspection Bureau in 2022, it was found that the company had adopted off-the-books operation means since 2014-2016 to sell the company's pharmaceutical instruments and their related accessories to a natural person A and others, and then recovered the sales money by means of cash collection, and the series of sales had not been recorded and invoiced in the company, and the corresponding costs had not been reflected on the accounts. The revenue obtained from this series of sales was not accounted for and invoiced at the Company, and no tax declaration was made, and the corresponding costs were not reflected in the accounts. The tax authorities determined that the company constituted tax evasion, and recovered the tax, late payment fees and fines.

Second, the risk of revealing: through off-the-books operations and other means of hiding income is the "Tax Administration Law" Article 63 does not list, under-listing of income for one of the manifestations of tax evasion, in practice, the purchase of raw materials for pharmaceutical enterprises to produce medicines normal deduction of tax, but the sale of medicines are not accounted for, or to provide the "extracorporeal circulation" to complete the purchase and sale of business; on the completed pharmaceutical sales transactions, the tax authorities found that the company constitutes tax evasion. Business; has completed the pharmaceutical sales transactions should be recognized revenue, long-term non-recognition; will be medical equipment, drugs and other gifts to medical institutions, but not to be treated as sales and other non-compliant behavior, often by the tax authorities audit, administratively easy to be identified as tax evasion, the more serious, may be sent to the public security, will be facing the criminal risk of conviction and sentencing of the crime of tax evasion.

(II) Tax risk of false invoicing in pharmaceutical enterprises

First, practice case: jilin dunhua city people's court announced a false value-added tax invoices criminal judgment, the defendant Liu in order to get improper use, respectively in dunhua city, longjing city registered a pharmaceutical company, through the means of giving others benefit fee to let wu mou, mu mou, respectively, as the legal representative of the two companies, Liu is the actual control of the two pharmaceutical companies. In the absence of actual business, through the two pharmaceutical companies to a number of pharmaceutical companies false value-added invoices, and was used by the pharmaceutical company for VAT deduction, the People's Court to false VAT invoices on Liu Mou conviction and sentencing.

Second, The risk of revealing: the highest penalty for the crime of false VAT invoices is life imprisonment, the latest prosecution standard (II) clearly states that the amount of false tax in more than 100,000 yuan or cause the loss of national tax amount in more than 50,000 yuan, shall be prosecuted, false VAT invoices crime is the amount of crime, that is, the amount of false tax of 100,000 yuan constitutes a crime. In addition, pharmaceutical enterprises have the business demand of purchasing APIs, and the components of APIs involve agricultural products, and the acquisition of agricultural products from farmers can issue invoices on their own, which has caused the existence of fraudulent invoicing of agricultural products by pharmaceutical enterprises for self-invoicing and self-benefiting, but in the context of the current tax and police joint handling of the case, and the Audit Office and other departments have also conducted reviews of the pharmaceutical industry, such behaviors are also very easy to be investigated and dealt with, and the light case is subject to administrative penalties, and the heavy case constitutes a tax-related crime. However, in the context of the current review of the pharmaceutical industry by the tax police and the Audit Office, such behavior is also very easy to be investigated, and administrative penalties will be imposed on them.

(III) Tax risk of external false opening of newborn business such as pharmaceutical service consulting

First, Practice Case: 2022, the Fujian Tax Bureau of a pharmaceutical information consulting company and other enterprises made a "tax treatment decision letter", due to the reasons for the inability to deliver the announcement of delivery. In the Decision Letter, it was shown that a pharmaceutical information company issued VAT invoices for a number of pharmaceutical companies without actual production and operation, and without real business transactions with downstream enterprises.

Second, the risk of revelation: "two votes" reform, pharmaceutical services consulting companies to replace the previous violations of the company's invoice, many criminals through friends, family, employees and other identity documents to register a large number of shell companies, in order to "consulting fees," "meeting fees," "consulting fees" and "meeting fees" and "consulting fees" and "consulting fees" and "meeting fees" and "meeting fees" and "consulting fees. Many criminals register a large number of shell companies through the identity documents of their relatives, friends and employees, and then falsely open VAT invoices for pharmaceutical companies under various names such as "consulting fee", "meeting fee", "service fee", etc. so as to obtain the illegal benefits such as red packets and kickbacks, and then flow to the relevant personnel through other means and ways. The criminal risk of this kind of false invoicing is extremely high, and this kind of illegal behavior is also very common in the major illegal cases announced by the tax authorities. In addition, these consulting firms have also committed tax violations by taking advantage of the fiscal rebate policy to issue false invoices.

(IV) Summary

In conclusion, the pharmaceutical industry will usher in the anti-corruption climax of the inspection of various state departments, tax violations will have no place to hide, the pharmaceutical industry involved in the various enterprises should seize the time for the above risk points for self-examination at the same time, to strengthen the study of notification of tax violations of illegal cases, to avoid the occurrence of tax non-compliance behavior. 

V. Anti-Corruption High Pressure: How Should Tax Risks in the Pharmaceutical Industry be Prevented?

(I) Ex-ante: building a tax compliance system to regulate business in all aspects

First of all, strengthen the training of the whole staff of the enterprise about tax compliance, and improve the awareness of tax compliance. Only when the pharmaceutical directors and supervisors establish the concept of tax compliance and pass it to their employees can a good tax compliance atmosphere be formed within the enterprise. Secondly, it is necessary to improve the risk management system of contracts, invoices and voucher auditing, establish an invoice management information database, and strengthen the audit of the counterparty before signing a contract to ensure the authenticity of the business, for example, to check whether there is a record of major tax violations through the official website of the Tax Bureau; in signing a contract, check the tax terms of the contract, and carefully audit the type of invoices issued and other elements; at the same time, to strengthen the purchasing of raw materials and medicines and other related departments' knowledge of invoices. At the same time, strengthen the training on invoicing knowledge for the purchasing department of APIs and other relevant departments, such as how to accurately and completely record the information of farmers and ensure the standardization of the purchasing process; finally, after completing the transaction, designate a special person to properly store the invoices, contracts and other information to confirm the truthfulness of the business and to avoid being recognized as false invoicing.

(II) During the process: hiring tax lawyers to actively respond to and resolve tax risks.

Under the current high-pressure anti-corruption situation, multiple departments are jointly handling cases to investigate and deal with tax violations and corruption in the medical industry. Pharmaceutical enterprises should carry out a tax health check on all aspects of their own tax-related business, and if problems are found during the self-inspection stage, remedies should be carried out in a timely manner, e.g., if it is found that the invoices obtained are fraudulent invoices, the inputs will be transferred in a timely manner, so as to avoid administrative penalties after being subjected to a tax audit. If the pharmaceutical enterprise has been tax audit, the tax authorities have made tax treatment, penalties and other notices, the pharmaceutical enterprise should apply for a hearing in a timely manner, to protect their own rights and interests, if still can not achieve their own claims, in the prescribed period of time in a timely manner to file a reconsideration, litigation; more serious, the pharmaceutical enterprises involved in tax-related violations have been transferred to the public security, or has entered the court proceedings, the need for criminal defense, and strive to be not guilty of the treatment. In these processes, there are substantive disputes, cumbersome procedures and other issues, pharmaceutical enterprises should promptly hire tax lawyers, and strive to resolve tax risks within the most favorable aspects.

 (III) Ex post facto: applying the compliance non-prosecution system

Compliance without prosecution refers to some lesser crimes and the possibility of prosecution of the enterprise, the prosecuting authority of the enterprise involved in the case has the will to establish a compliance system, to correct the illegal and criminal behavior, and ordered the enterprise in a certain test period on the facts of the illegal and criminal to put forward the construction and implementation of the compliance system plan, and then the prosecuting authority in accordance with the acceptance of the compliance program of the enterprise involved in the case to make a decision on the non-prosecution. Therefore, when an enterprise's tax non-compliance behavior is recognized as a tax-related crime, the enterprise can propose an effective rectification of the tax compliance system in exchange for the procuratorial authorities' decision not to prosecute. For example, Company J was suspected of the crime of fraudulent issuance of VAT invoices, resulting in a loss of more than 1.2 billion yuan of national tax was transferred to the Public Security Bureau, Company J used the compliance non-prosecution system to make up for the loopholes of tax compliance by adopting a series of measures within the enterprise, and ultimately, after the inspection of procuratorate authorities, made the decision of non-prosecution of the compliance, which avoided the irreversible losses of enterprises due to the conviction and sentence of the tax-related crimes. Losses.
 

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Copyright@2019 Aequity.ALL rights reserved京CP备17073992号-1