Policy background and purpose
Why should we strictly investigate “paying for export”?
After China cancelled the steel export tax rebate policy in 2021, the phenomenon of some enterprises evading tax supervision through the “paying for export” model has intensified. “Buying for export” means that enterprises use third-party customs declaration qualifications, forged trade contracts or low-priced invoices, etc. to falsely report export amounts to evade taxes. This behavior not only disrupts the market, but also leads to the loss of national tax revenue and weakens the global competitiveness of China’s steel exports.
In order to solve this problem, on March 28, 2024, the State Administration of Taxation of China, together with the Ministry of Finance, the Ministry of Commerce and other five departments, issued the “Announcement on Strengthening Tax Supervision on Steel Exports”, which clearly requires:
Tax registration pre-registration: tax registration must be completed before the enterprise goes through customs declaration procedures.
Tax settlement closed loop: if customs declaration is cancelled, tax settlement must be completed.
Joint punishment mechanism: for enterprises that violate regulations, those with serious behavior will be included in the “tax blacklist”.
This announcement safeguards the national fiscal and tax interests and promotes the normal and sustainable development of the industry.
Fatal risks of “paying bills and exporting”
Why should enterprises be vigilant?
“Paying bills and exporting” may seem like a good deal in the short term, reducing costs and increasing profits, but the hidden legal and operational risks behind it are enough to ruin a business.
Legal risks: According to the Tax Collection and Administration Law, tax evasion will not only face a fine of 50% to 500% of the tax payable, but even serious cases will involve criminal liability.
Supply chain risks: Relying on underground banks or third parties to declare customs will face many uncertainties, such as order delays, goods being detained, etc., which will affect normal operations.
Reputation risks: Once a company is included in the regulatory blacklist, it will no longer be trusted by customers and it will be difficult to maintain long-term business.
Impact of the new policy on the steel export industry
Short-term pain: Companies that rely on “paying the bill” will face a survival crisis under the implementation of the new policy, non-compliant behaviors will be cleaned up, and the entire market will undergo a reshuffle.
Long-term benefits: Companies that operate in compliance will benefit from the new policy, not only winning the trust of customers, but also improving their international competitiveness.
Buyer risk transfer: For international buyers, if they cooperate with non-compliant companies, they will face risks, so international buyers will be more cautious when purchasing and look for compliant and reputable suppliers.
After the implementation of the new policy, the compliance rate of China’s steel export declarations has increased from 65% to 89%, and the export unit price has increased by 12% year-on-year.
Corporate Survival Guide
How to avoid risks and achieve compliance transformation?
In-depth review of the supply chain
Qualification verification: Enterprises should conduct qualification checks on the customs brokers and suppliers they cooperate with to ensure that they are formal.
Contract transparency: When signing a contract, it is necessary to provide a real trade contract VAT invoice and foreign exchange settlement voucher.
Internal compliance system construction
Tax training: Enterprises should organize training regularly to enhance the professional capabilities and awareness of employees.
Digital management: Introduce an ERP system to track the entire process of customs declaration, taxation and logistics to avoid human operation loopholes.
Summary
China’s strict inspection of “paying the bill for export” is not a short-term campaign-style law enforcement, but an inevitable choice to promote industrial development and upgrading. In such a market environment, only if enterprises comply with tax regulations and consolidate internal management can they move forward steadily in international trade. In order to maintain the market position and international reputation of enterprises, we call on every company to immediately self-check its supply chain compliance and jointly defend the reputation and position of Chinese steel in the global market. Promote the healthy development and upgrading of the entire steel industry. Let us move forward hand in hand and create a brilliant future together!
