A construction developer has been sentenced to 10 years behind bars for attempting tax fraud valued at $15 million, in what the Australian Taxation Office calls the end to one of its longest fraud investigations.
Hightrade Group executive Li Zhang was on Friday sentenced to 10 years imprisonment, with a non-parole period of six years and eight months, for his involvement in a complex and multi-tiered tax fraud operation.
His sentencing caps off Operation 4, an investigation which launched in 2008, following five years of audits.
According to the ATO, the scheme operated on three tiers, where bogus GST arrangements cascaded from top companies down to related “sacrificial” companies at the bottom.
The first level of the scheme saw Tier One developers recruit Tier Two building companies to build a hotel or golf course in the Hunter Valley and Sydney regions.
The Tier Two companies then obtained goods and services from the bottom-layer Tier 3 companies.
“The developer claimed they paid GST to the building companies and the building companies claimed they paid GST to the sacrificial suppliers”, the ATO said, in a process known as “GST skimming.”
“Grossly inflated construction costs and purchases of goods between the companies that never actually occurred were also recorded to claim additional GST.”
The arrangement “ultimately failed to remit the GST to the ATO,” said ATO assistant commissioner Jade Hawkins.
Hawkins said the sentencing of Zhang, who fled Australia for New Zealand during the tax office’s investigations, was proof of the ATO’s investigative powers.
“The sentencing of Mr Zhang shows that no matter where you are, we will find you and hold you accountable for your actions,” she said.
“Tax crime affects the whole community,” Hawkins continued.
“This was not an ordinary business operating legitimately – it was outright tax fraud.”
While the sentencing marks the end of a long-running process, the ATO has recently flaunted its investigative powers.
The tax office secured 174 criminal convictions in the 2022-2023 financial year, it said in October, reflecting its no-nonsense approach to deliberately deceitful tax practices.
“We are committed to ensuring the integrity of the tax and super system as well as levelling the playing field for businesses who do the right thing,” Hawkins added.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
