More than 100 suspects have been arrested nationwide.

The case is believed to be the largest VAT forgery case since China started to reform its tax system in 1994.

The chief suspect, Chen Xuejun, was reported on Thursday to have got false VAT receipts from Wu Zhigang, an employee of a State-tax bureau in Beijing, under the names of 28 companies registered by Chen between October 1999 and February.

Chen and his accomplices allegedly sold the VAT receipts to companies throughout the country, which used the receipts to escape taxes.

The crime gang is said to have obtained more than 20 billion yuan (US$2.4 billion) within 16 months, of which 3.1 billion yuan (US$374 million) has been investigated and verified by the police.

The fraud was exposed by a member of the gang who supposedly had not received a fair share of the illegal money, and Chen and Wu were arrested by Beijing police in February.

Chen, a native of East China's Zhejiang Province who moved to Beijing in 1996, obtained millions of yuan by selling false VAT receipts. At the time he was caught, there remained 3.9 million yuan (US$470,000) on his credit card.

Wu, as an ordinary State-tax employee, also became extremely rich, buying a car after joining the crime gang.

The case has exposed some problems existing in the management of the grass-roots tax departments, as a report quoted Wu as saying "supervision on grass-roots work is not tight, and the management is not efficient."

Management of VAT receipts is closely linked to the financial revenue of the State and the development of its economy, the report said.

(China Daily December 9, 2001)