20/06/23

HONG KONG: Massive smuggling ring unveiled: millions in taxes evaded

As published on: vino-joy.com, Tuesday 20 June, 2023.

In a remarkable case that has stunned authorities, a clandestine network of cross-border wine smugglers has been uncovered in China, with the operation in full force at the height of border controls and restrictions. The smuggling ring, responsible for transporting high-value fine wines, including prestigious classified Bordeaux and Burgundy, managed to evade taxes estimated to be at least RMB 23.48 million (US$3.28 million), according to authorities.

The revelations came to light during a recent court ruling in Shanghai, exposing the covert activities of Magic Cup (Shanghai). To execute their operation, the company enlisted the services of two intermediaries, surnamed Zhang and Zhuang, who played pivotal roles in smuggling the wines across the border from Hong Kong to mainland China, even amid stringent pandemic measures.

What unfolded was a sophisticated web of connections and intricate schemes that skilfully circumvented customs regulations. Zhang and Zhuang, acting as the intermediaries for Magic Cup (Shanghai), established connections with smuggling syndicates operating in Hong Kong. They meticulously orchestrated the transfer of the tax-free wines, employing a network of handlers who would personally transport the bottles across the border, evading customs.

Remarkably, these illegal operations persisted for a staggering 14 months, spanning from July 2020 to September 2021, a period when Hong Kong borders are closed and cross-border travel was severely restricted, with mandatory 14-day quarantines imposed on all travelers upon entry.

Once the smuggled wines reached Shanghai, Magic Cup (Shanghai) would proceed to sell them through various on-trade channels. As investigations deepened, the magnitude of the tax evasion became clear. Authorities estimated that the Shanghai company had managed to evade a mind-boggling total of RMB 14.97 million in taxes, while Zhang himself had evaded approximately RMB 8.5 million.

Moreover, the investigation into Magic Cup (Shanghai) unearthed an additional smuggling operation involving Zhang. Between November 2021 and August 2022, Zhang had been recruited by Shenzhen Youshi Supply Chain Company to smuggle wines across the border. The exact amount of taxes evaded in this case was not disclosed.

In light of these revelations, the owner of Magic Cup (Shanghai) was handed a severe sentence of 3 years and 9 months in jail and a hefty fine of RMB 10 million. Zhang, on the other hand, received a prison sentence of 3 years and 6 months, along with a penalty of RMB 4 million.

The discovery of this wine smuggling network has sent shockwaves through China’s law enforcement agencies, highlighting the lengths to which some individuals will go to evade taxes and profit from illicit activities.

Tags

Hong Kong Tax Evasion Tax Avoidance