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Auckland, November 8, 2017
The Serious Fraud Office (SFO) has concluded its investigation into the affairs of Zespri Group Limited concerning allegations of criminality arising from the practice of dual invoicing.
SFO Chief Executive Julie Read has closed the investigation having determined that the conduct did not meet the high evidential standard for laying criminal charges.
Dual invoicing
The allegations investigated by the SFO were that Zespri facilitated tax evasion while exporting kiwifruit to the People’s Republic of China (PRC) until mid-2011 by providing false invoices for its importer to use when making duty declarations to PRC Customs Officials. The SFO was concerned about both Zespri’s dual invoicing practice and subsequent efforts by it to distance itself from the importer’s offending in the form of letters written to Chinese investigation and prosecution agencies.
Dual invoicing is not necessarily illegal, however the SFO advises that New Zealand exporters should approach the practice with extreme caution as it is a warning flag for duty evasion being committed in foreign jurisdictions.
Criminal offending
Ms Read said, “In this case, the practice of dual invoicing facilitated criminal offending in China. The lower valued invoice was used by Zespri’s importer to evade duty and resulted in him being convicted for the Chinese offence of smuggling. The instrument of that offending was created by Zespri in New Zealand. For that reason the matter properly came to the attention of the SFO.”
She added, “The Zespri investigation has been lengthy and reflects the fact that we were required to review complex and unusual arrangements between Zespri and their Chinese importers. The gathering of documentary and witness evidence took much longer than usual in this matter.”
Background information
Dual invoicing describes a process whereby two invoices of differing values are produced for the same product but for different purposes, such as one invoice being used for Customs declaration purposes and the second for revenue recognition.
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