Since the Supreme People's Procuratorate deployed the pilot work of enterprise criminal compliance non-prosecution reform in six grass-roots procuratorates in March 2020, the practice of compliance non-prosecution of tax-related crimes has been carried out throughout the country. The practice effectively implemented the "less arrest and careful prosecution" proposed by the Supreme People's Procuratorate and the spirit of protecting the development of private enterprises. After searching in Yuandian Think Tank, we found 23 cases of falsely issuing special VAT invoices without prosecution in the reform of economic cooperation and regulation. This article will summarize and evaluate these cases.
A. The List of 23 Cases of Compliance Non-Prosecution Cases of Falsely Issuing Special VAT Invoice
B. Evaluation of the 23 Cases of Compliance Non-Prosecution Cases of Falsely Issuing Special VAT Invoice
1、 Geological distribution
In terms of geographical distribution, 15 of the 23 cases of false non-prosecution of criminal compliance came from Jiangsu Province, accounting for 65%, and the other 8 cases were distributed in Anhui Province, Hubei Province, Zhejiang Province, Hebei Province and Liaoning Province. Of the 15 cases in Jiangsu Province, there were 7 cases came from the Zhangjiagang People's Procuratorate in Jiangsu Province. This is mainly because the Zhangjiagang People's Procuratorate of Jiangsu Province is one of the first batch of pilot procuratorates for non-prosecution of criminal compliance in China. In May 2021, the Zhangjiagang People's Procuratorate of Jiangsu Province was also selected to be the research object and being inspected by Zhang Jun, the procurator general of the Supreme People's Procuratorate. In addition, after the pilot work of non-prosecution of criminal compliance began, Jiangsu, Zhejiang and Liaoning successively issued local refinement policies, which provided a reference for local practice.
In the second batch of pilot non-prosecution of criminal compliance in April 2021, Jiangsu, Zhejiang, Hubei and Liaoning were included. Combined with the above background, it is not difficult to understand why tax related criminal compliance non-prosecution cases mainly appear in these areas.
2、 Type of enterprises involved
From the perspective of the types of enterprises involved, among the 23 cases of false criminal compliance non-prosecution, 7 cases occurred in the transportation industry, and the other 16 cases were in manufacturing, trade, scrap steel, clothing, electronics and other industries. In seven cases in the transportation industry, the persons not prosecuted were in various business, such as billing platform enterprises, ticketed transportation enterprises, introducers, etc. This phenomenon reflects that the transportation industry, with high risk of tax invoice related crimes, may also apply the compliance non-prosecution system in recent two years. And the compliance non-prosecution policy is not limited to the enterprises who actually providing transportation services to the outside world. For the Internet transportation billing platform, those involved in tax invoice related criminal responsibility can also try to resolve the risk through criminal compliance non-prosecution. In addition, manufacturing, trade, waste materials and other industries with high risk of tax invoice related crimes also need to pay close attention to the compliance non-prosecution system.
3、 Amount of tax involved
In terms of the amount of tax involved, the amount of tax involved in 23 cases of false criminal compliance non-prosecution ranged from 50,000 to 500,000, of which 17 cases ranged from 50,000 to 500,000 and the other 6 cases ranged from 500,000 to 2.5 million. Among the cases in which the amount of tax invoice falsely issued is between 50,000-500,000, there are 15 cases in which the amount of tax invoice falsely issued is between 100,000-500,000, accounting for 65% of the all cases. It is obvious that 100,000-500,000 is the range in which compliance non-prosecution is more likely to apply. It is worth noting that according to the notice of the Supreme People's Court on issues related to the conviction and sentencing standards for falsely issuing special invoices for value-added tax (Law  No. 226), the latest conviction and sentencing standards for falsely issuing a crime are: those who falsely issue a tax amount of more than 50,000 yuan shall be sentenced to fixed-term imprisonment or criminal detention of not more than three years; If the amount of tax falsely declared is between 500,000 yuan and 2.5 million yuan, the defendent shall be sentenced to fixed-term imprisonment of three to ten years. Therefore, the legal punishment of six cases was in the range of the second level (i.e. three to ten years' imprisonment), but finally had the chance of non-prosecution. It can be seen that the compliance non-prosecution system has a very positive significance for resolving tax related criminal risks in the prosecution stage.
4、 Lenient circumstances involved
As for the lenient circumstances, the 23 cases commonly have two lenient circumstances: paying taxes and pleading guilty to punishment. In addition, 13 cases of non-prosecution have the circumstances of voluntary surrender, 2 cases of non-prosecution have the circumstances of meritorious service, and 1 case of non-prosecution has the circumstances of first-time and accidental crime. From the perspective of legislation, the Supreme People's Procuratorate issued the work plan on carrying out the pilot of enterprise compliance reform in April 2021, which proposed that "carrying out the pilot of enterprise compliance reform should be combined with the application of the leniency system of guilty plea and punishment and prosecutor suggestions, the clean-up of 'pending cases', and the application of non-prosecution according to law". In June 2021, the Supreme People's Procuratorate issued the trial guidance on establishing a third-party supervision and evaluation mechanism for the compliance of enterprises involved, which clearly stipulates that "enterprises and individuals involved plead guilty and accept punishment" is the premise for the application of enterprise compliance pilot and third-party supervision. Therefore, the pleading guilty and accept punishment is the prerequisite to apply the non-prosecution system for tax related cases.
Tax related criminal cases is unique in the way that suspect can make the overdue tax payment, which can serve as a sign of the suspect’s intention to “accept punishment”. And the suspect's penitence is also a key factor for the initiation of the compliance system. It is worth noting that for cases with a false tax of more than 500,000 yuan, it is difficult to apply the compliance non prosecution system only for the two lenient circumstances of supplementary tax payment and guilty plea and accept punishment. It also needs to be combined with voluntary surrender, meritorious service and other circumstances that can reduce the punishment.
C. Suggestions on the application of criminal compliance non-prosecution system in cases
1、 The enterprise involved in the case should fully communicate with the prosecutors on the feasibility of applying the compliance non-prosecution system
Compliance non-prosecution is a criminal dispute resolution system piloted by the Supreme People's Procuratorate. From the perspective of top-level design, compliance non-prosecution is quite innovative, and it is still different from the relative non-prosecution stipulated in the current criminal law, criminal procedure law and other laws and regulations. In academic circles, some scholars even pointed out that the non-prosecution system of criminal compliance subverts the foundation of criminal law and will eventually lead to the abuse of the relative non-prosecution system. From a practical point of view, the compliance non-prosecution system is essentially a new field and system spawned under the guidance of the prosecution system's emphasis on "six stabilities and six guarantees" and the healthy development of private enterprises. The prosecutors undoubtedly have an absolute voice in the compliance non-prosecution system. If the parties want to apply the compliance non-prosecution system, they must fully communicate with the prosecutors first. In particular, for the cases involving large amount of tax and the legal penalty range of more than 3 years, if the parties rashly plead guilty and admit punishment without knowing the attitude of the prosecutors and the feasibility of non-compliance prosecution in advance, they may not only be unable to apply non-compliance prosecution, but also lose other defense opportunities, resulting in heavy sentencing.
2、Enterprises involved in the case in the pilot area can actively advocate the application of the compliance non-prosecution system
At this stage, the system of non-prosecution of criminal compliance has not been spread all over the country. For the enterprises involved in the case in the pilot area, the compliance non-prosecution system is undoubtedly an additional opportunity. After full communication with the prosecutors, if it is clear that it is possible to apply the compliance non-prosecution system, the parties should actively grasp it and take the initiative to apply for compliance rectification. According to the provisions of the pilot work plan on enterprise compliance reform, there are ten pilot areas, namely Beijing, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Hubei, Hunan and Guangdong. In the application stage, the parties concerned should be fully aware of the requirements and conditions for starting the compliance rectification procedure. In addition to the national policies, they should also pay attention to the local detailed policies. For example, the opinions of Liaoning Provincial People's Procuratorate and other ten procuratorate on the establishment of a compliance inspection system for guilty enterprises stipulates that starting the compliance non-prosecution procedure has certain requirements for the parties involved. And the enterprises involved must have a certain influence in one or more aspects, such as absorbing employment, driving economic development, intellectual property rights, upstream and downstream industry chains.
3、Carry out compliance rectification according to the requirements of the third party organization
The third-party supervision mechanism of criminal compliance is divided into seven processes: (1) the party applies to start the third-party supervision procedure and the prosecutor reviews it; (2) The third party management committee randomly selects from the list of professionals to form a third-party panel; (3) The enterprise submits special or multiple compliance plans; (4) The third party shall organize to review the compliance plan and determine the compliance inspection period; (5) The parties shall implement the compliance plan, carry out required rectification, and the third party shall organize regular or irregular inspection; (6) The third party shall organize evaluation and assessment and prepare a written report on compliance inspection; (7) The prosecutor makes decisions on prosecution or non-prosecution, and puts forward sentencing suggestions or prosecutor’s suggestions. The start of the third-party supervision mechanism is the key to non-prosecution of compliance, and the following compliance rectification process is equally crucial. The parties shall fulfill the compliance plan according to the requirements of the third-party panel and strive to obtain the result of compliance non-prosecution.