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Shangde donation fraud: Evading tax in disguise of charity act

08-16-2011 09:07 BJT

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To encourage companies to give back to society through donations, the Chinese government has put into place tax benefit policies. However, a company located in Wuxi city in east China's Jiangsu province seems to have manipulated the policies to earn extra profit.

Last month, the Fifth Chinese Youth Creative Competition was held in central China's Hubei province. The Shangde Solar Power Electric Company, saying it wanted to support China's youth education, promised a donation of solar panels worth a total of 15 million Yuan.

In return, Shangde became the sponsor of the competition which was organized by Copyright Society of China. The company was also provided with a 15 million Yuan invoice from the China Charity Federation, with which Shangde can claim a tax deduction from the government.

Last month, the Fifth Chinese Youth Creative Competition was held
in central China's Hubei province. The Shangde Solar Power Electric
Company, saying it wanted to support China's youth education,
promised a donation of solar panels worth a total of 15 million Yuan.

This seemed to be a win-win situation. But Mr. Luo who works for the competition's organizer says the charity act was in fact a fraud.

Luo Fanhua with Copyright Society of China, said, "Shangde promised to support the event through donating equipment. They became the main sponsor of the competition but in the end they didn't deliver on the promise."

In response, Shangde claimed the accusation is simply baseless. An invoice provided by the China Charity Federation was shown to prove the donation has in fact been completed.

Huang Jianzhang, vice chairman of Shangde, said, "We already made the donation to the intermediary company. The company is responsible for sending it to the recipients."

But a careful review of the donation process raised some doubts. The donation was supposed to be first made to the China Charity Federation which would provide a tax deductible invoice to Shangde after receiving and reviewing the donation. China Charity Federation should then deliver the donation to the Copyright Society of China for distribution.

However, the China Charity Federation didn't get the donation. In its requirements, Shangde had specifically appointed the Beijing Creative Zhongyi Company as the final party for executing the donation.

All seemed legitimate until Luo points out that Shangde had bypassed the first two legs of the process, and the Chairman of Creative Zhongyi just happens to be the vice chairman of Shangde. So there was no supervision of the process by anyone else other than Shangde itself.

 

Editor:Zhang Dan |Source: CNTV.CN

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