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Seven sentenced to die in China corruption case

China execution
China has executed scores of officials in its fight to end graft  

BEIJING, China -- China has sentenced seven people to death for tax fraud in connection with what could be the biggest corruption case of the Communist era.

State media reports say the group includes two tax officials and a former prosecutor, who claimed export tax rebates worth more than $7 million using fake tax receipts from so-called "shell" companies, with no staff or offices.

Official say the case could equal a multi-billion dollar smuggling scandal, centered around the eastern port of Xiamen last year. The case has brought down top national officials, including a former national deputy chief of police.

"A series of cases of export tax rebate fraud are under investigation which may involve 50 billion yuan [$6 billion]," an official from the Shanghai Customs Office said.

'Money for nothing'

China tried to encourage exports by giving back 15 percent of a 17 percent value added tax levied on the production side.

But many Chinese firms claim export rebates by producing fake tax receipts, export orders and customs papers. The goods are then sold on the domestic market.

Freight industry sources say they have been shipping empty containers between Guangdong and Hong Kong to get necessary export papers.

"This is quite a common practice," one Chinese executive said. "You simply sort out the export papers and then sell the stuff on the domestic market. It's money for nothing."

Authorities discovered the fraud last year, when they were hit by a massive increase in export tax rebate claims.

"The Chinese government has found it difficult to honor the tax refunds for all of these exporters, so it seems to them that there must be some fraud," Matthew Wong of accountancy Price Waterhouse Coopers in Shanghai said.

Premier Zhu Rongji calls export rebate fraud an "outstanding social and economic problem" and described the latest crackdown as an "urgent economic struggle."

Two executed for fraud

The report comes on the same days as news that China has executed two more officials from the impoverished province of Guizhou on Friday for embezzling $8.8 million in off-budget funds, cash from government loans and state treasury bills.

Xu Jie and Du Jiansheng were sentenced to death in August and lost their final appeal in September.

China has executed scores of government officials, some of them senior party members, for corruption over the last year in a campaign against graft which the Communist Party says is the biggest threat to its grip on power.

Reuters contributed to this report.



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