Invoices bearing no genuine underlying transactions have been flowing from a single enterprise services firm to hundreds of insurance entities over an extended period. On September 15, a public notice from the First Inspection Bureau of the Guiyang Municipal Taxation Bureau under the State Taxation Administration revealed that Guizhou Yunshang Enterprise Services Technology Co., Ltd. issued a total of 16,700 value-added tax invoices to 303 insurance institutions between October 2020 and December 2023, with the cumulative invoice value reaching 922 million yuan. The tax authority has determined that these invoices constitute fraudulent issuance and has proposed imposing administrative fines on the company. According to the National Enterprise Credit Information Publicity System, the company has subsequently been placed on the list of enterprises with abnormal operating status.

Tracing the implications of this announcement raises a critical question: why insurance institutions in particular? Why over 300 companies? And why did this practice persist for more than three years? The situation represents a paper-based manifestation of a well-known problem within the industry of fabricating expenses to siphon off funds, according to Long Ge, co-founder and general manager of Zhongtuobang. Regulatory frameworks clearly prohibit issuing invoices without real transactions, and financial regulators have explicitly banned the use of service fees or consulting charges as disguised channels for paying commissions or inflating costs. A review of historical regulatory penalties shows that citations for fabricating expenses to extract funds are not uncommon across the insurance sector, often involving disguised categories such as conference expenditures, promotional and advertising costs, or service fees.

Long Ge explained that under the current unified accounting and reporting requirements, insurance companies face hidden expenditures including channel rebates and business promotion expenses. When legitimate receipts are unavailable, firms frequently resort to acquiring service fee invoices from shell companies to balance their books. The scale of the scheme suggests a mature operational chain involving invoice issuers earning tax margins, insurers reconciling their financial records, and funds flowing back through intermediary channels. The persistent nature of this practice stems from internal controls that validate only the existence of invoices rather than verifying the authenticity of the underlying business activities.

Lin Xianping, associate professor at City College of Zhejiang University, characterized the situation as exposing a long-standing industry malady of inflated expenses and off-book cash extraction. The invoicing of non-existent transactions represents a core mechanism through which insurance firms manufacture operating costs to divert funds outside formal accounting systems, constituting an overlap of tax violations and financial regulatory breaches. Lin emphasized that the practice carries severe consequences, including material distortion of financial statements, impairment of regulatory judgment, and disruption of industry-wide risk control frameworks. Additionally, it fosters unfair competition, facilitates improper benefit transfers, undermines market order, and results in significant losses of state tax revenue.

Looking at remedial actions, Long Ge noted that affected parties may be required to pay back taxes, while insurers risk being cited under the Insurance Law of the People's Republic of China for submitting falsified materials. Both corporate entities and responsible individuals face dual penalties, and the sheer volume of invoices could trigger criminal liability. Addressing the root causes demands coordinated efforts across multiple fronts, according to Lin. Regulatory authorities should strengthen tax-insurance information sharing, conduct look-through inspections, and escalate punitive measures to deter misconduct. Insurance companies must restructure performance evaluation systems to reduce emphasis on raw scale, develop comprehensive internal expense tracking mechanisms, and reject round-trip transactions. Concurrently, authorities should vigorously target third-party intermediaries engaged in issuing fraudulent invoices, severing the gray-market profit channels at their source, and fostering a compliance-driven, standardized operating environment across the industry.