Summary of Key Points
Recently, the State Taxation Administration revealed seven cases of online retailers evading taxes. The most prominent case involved Liaocheng Nai Pao Trading, which concealed revenue of 207 million yuan through a personal account and failed to pay 5.44 million yuan in taxes before “evacuating” by closing its business. However, the owner, Ren Wei, was held accountable and ultimately had to pay back the taxes, late fees, and fines totaling 9.71 million yuan. This demonstrates that the tactic of closing a business to avoid taxes no longer works. The tax authorities are sending a strong signal through these frequent exposures, reminding all e-commerce businesses to operate in compliance.
Detailed Analysis
1. The “Evacuation-Style” Tax Evasion Tactics Used by Online Retailers
The trick essentially involves three steps:
- Step 1: Open an individual business online (such as Nai Pao Trading) and collect payments through the owner’s personal WeChat, Alipay, or bank account, hiding the revenue.
- Step 2: Fail to report the income to the tax authorities and avoid any tax registration, pretending that nothing has happened.
- Step 3: Once enough money has been made or there is a fear of being investigated, quickly close the business, thinking that the tax authorities will no longer be able to locate the owner.
Both Nai Pao Trading and another case involving Xie Tian used this method to evade taxes by collecting payments through personal accounts, not reporting income, and then closing their businesses.
2. Why Can Tax Authorities Still Hold You Liable Even After Closing a Business?
Many owners believe that closing a business solves all their tax issues, but the law does not allow it:
- Tax clearance before closure is mandatory: According to regulations, any outstanding taxes, late fees, and fines must be paid before closure. If false documents are used for closure, the registration authority can reverse the process.
- Individual business owners cannot escape responsibility: The Civil Code clearly states that individual businesses are operated by individuals, and any debts (including taxes) must be repaid with personal assets. Even if the business is closed, the owner remains liable.
- Illegal responsibilities do not disappear: Professors from Shandong University have explained that while a business closure terminates operations, previous illegal activities (such as tax evasion) do not automatically cease. The tax authorities can reinstate registration to collect the debts or directly pursue the owner.
Therefore, Nai Pao Trading’s attempt to evade taxes by closing its business was futile; Ren Wei had to pay the full amount in taxes and fines.
3. The Lesson from Nai Pao Trading
This case is a prime example:
- Methods used: Ren Wei collected 207 million yuan in cosmetics sales through personal accounts between 2023 and 2024, without any tax registration or reporting, resulting in a tax evasion of 5.44 million yuan.
- Actions taken: In July 2024, Ren Wei quickly closed the business, hoping to avoid taxes.
- Consequences: Upon receiving reports, the tax authorities determined that Ren Wei was jointly liable and fined 9.71 million yuan (including taxes, late fees, and fines), although all the required payments had already been made.
In other words, despite evading 5 million yuan in taxes, Ren Wei ended up paying nearly 10 million yuan in total—more than the amount stolen, plus additional fines, resulting in a huge loss.
4. It’s Not Just Nai Pao Trading: Frequent Exposures Serve as a Warning to All E-Commerce Businesses
This is not just about Nai Pao Trading:
- The day before (July 9), another case involving Xie Tian was revealed: He concealed 1.69 million yuan in revenue and then closed his business, eventually being liable for 2.76 million yuan in taxes.
- A senior official from the State Taxation Administration stated clearly that the internet is not a place outside the reach of the law. Using personal accounts to collect payments and closing businesses to evade taxes are both illegal acts, and all platform merchants must operate legally.
The purpose of these frequent exposures is clear: to warn all e-commerce owners that such tax evasion tactics are no longer effective, and any further attempts will definitely lead to investigation.
5. Three Reminders for E-Commerce Owners
If you are an online retailer, remember the following:
- Do not use personal accounts to collect payments: Only using official business accounts for payments ensures compliance; hiding revenue through personal accounts will inevitably lead to discovery.
- Report taxes on time: Even as an individual business owner, you must register and file tax returns regularly; don’t pretend to be unaware of your tax obligations.
- Clear your taxes before closing: If you plan to close your business, make sure to pay off all outstanding taxes before doing so. Avoid any fraudulent closure procedures, or you will bear personal responsibility.
In summary, honest tax payment is the foundation for a sustainable business. Trying to evade taxes will only result in greater losses.