Since value-added tax (VAT) was introduced in 1992, there have been several cases of false refunds, but the offenders, especially the big fish, always managed to slip through authorities' fingers.
Not any more. The government is taking a proactive approach to investigation and punishment in such cases.
Falsified VAT refunds to the Revenue Department just in Bang Rak district of Bangkok and all of Samut Prakan province from 2012-13 resulted in a loss of more than 4.3 billion baht to the state.
The public didn't give the case much notice, not expecting to see a successful outcome from internal investigations.
However, they could not have been more wrong: Prime Minister Prayut Chan-o-cha invoked Section 44 of the interim charter to suspend 45 senior officials, including 24 ministerial officials, pending investigation into corruption allegations.
These people were transferred to inactive posts while investigations continue.
At the same time, Finance Minister Sommai Phasee commanded finance officials to look at tax return processes thoroughly to prevent further false refunds, implementing rewards and punishments as motivation for staff to plug loopholes.
The Revenue Department will submit a list of 14 additional officials and local administrators suspected of involvement with the Bang Rak case to Mr Sommai soon.
Among those suspended are high-ranking officials at the Finance Ministry, including its chief inspector-general Satit Rungkasiri, who was director-general of the Revenue Department at the time of the alleged fraud.
The S44 order came a week after Siripong Riyakarntheerachote, whose former name was Supakij Riyakarn, was sacked by the ministry for serious misconduct for causing a hefty loss to the state while he was chief of the Revenue Department's Bang Rak office.
The case reads like a film script with a complicated plot, in this instance designed to make it difficult to find the source of any fraud.
It is believed the conspiracy involved three groups: the Revenue Department's executive officials, officials involved with ground operations, and outsiders.
The investigation began when information on the practices of Area 22 in Bang Rak was leaked by local officials in an anonymous letter to the National Anti-Corruption Commission, the Office of the Auditor-General and the Finance Ministry.
Officials found that swift tax refunds of large amounts averaging 500 million baht had been made to a steel exporter that had been established for only about six months.
That was clearly against Revenue Department practices implemented since 2003 that dictate that "new business operators who had registered to file for their VAT returns in the first taxation month were required to submit their first month's tax refund to the regulatory team".
Officials would have had to delay the tax refund for six months while waiting for the result of the first-month tax return audit.
Noting the irregularity, the deputy director and an inspector filed a proposal to Mr Satit to initiate a thorough investigation.
But after inspecting Area 22 in Bang Rak, Mr Satit did not demand the Office of Federal Tax Audit investigate the case. His visit only reiterated the policy that the implementation of tax refunds should be accelerated when taxpayers had filed their tax returns correctly.
A high-ranking civil servant who behaved honestly and prudently should have demanded an investigation to prevent state losses when a newly established company claimed a large tax refund, a senior Finance Ministry official said.
Eventually, then Finance Minister Kittiratt Na-Ranong demanded the setting up of an investigative committee based on the evidence and complaints. Finance deputy permanent secretary Prasit Suebchana, who was the ministry's inspector-general at that time, chaired that committee.
The committee's investigation found 65 companies asking for VAT refunds by claiming they were steel exporters.
The claim was untrue. These companies had purchased copies of identity cards from villagers in Phichit and Tak provinces for 200-500 baht each. The aim was to use these copies to set up new companies with the Internal Trade Department of , open a bank account for the gang's financial transactions, and register these companies as taxpayers with revenue offices.
Those involved selected revenue offices in Bangkok's Area 22 covering Bang Rak district and Samut Prakan province's Area 1 as their VAT refund channels.
They brought tax invoices for purchases and sales as evidence for requesting VAT refunds at revenue offices. These transactions had never occurred and were actually internal trades within a self-made paper company.
When combined with the value of filed tax invoices, the total value of the transactions was more than 60 billion baht.
The source said the investigation found that revenue officials had given tax rebates in an accelerated manner by providing tax returns within one or two days following requests.
In some cases, the filing for tax returns was made in Area 22 but the tax invoices were issued by the Samut Prakan revenue office.
The Samut Prakan office sometimes verified that tax invoices were genuine even though they were bogus. The office at Area 22 also would not wait for approval from the Samut Prakan branch and decided to hand out tax returns, which was considered as against the refund procedure.
The scheme symbolised a collaboration between officials of both revenue offices.
Officials involved with tax returns to this criminal gang should have been aware of many irregularities, the source told the Bangkok Post.
Besides a newly established company requesting a huge sum in tax returns, it was rather implausible that a paper company would purchase a large quantity of steel scraps, valued around 60 billion baht, intended for exporting from a small lorry.
Also, certain kinds of steel could not be purchased in the market as they were meant to be used for work-related purposes.
Inspectors also found that the paper company's office was merely a room containing only a facsimile machine. However, revenue officials in Area 22 claimed they had already inspected the company before giving approval for it to register for VAT. They even gave the company a rating of three out of five for location credibility.
In addition, Surachet Maharumruek was the sole person from 20 paper companies requesting tax returns who came to receive tax rebate cheques at revenue offices.
Meanwhile, the Customs Department, which checks merchandise exported to foreign countries, could not verify those falsified exports. The department's system for verifying exports would randomly check 5% of total export quantity or examine an unusual container after being alerted by a source.
A random X-ray check on an export container by customs officers identified stones inside a container instead of steel scraps as listed on the invoice.
The paper company then filed a lawsuit against the shipping firm stating that it had misappropriated its products. When the case went to court, the paper company said it had reached mediation with the shipping firm. The case was settled when the court ordered a fine for a false declaration.
The case is a big blow to the Revenue Department. Mr Sommai has stated that this is the first occurrence of such immense fraud in his 30 years as a civil servant.
Mr Sommai, who is also chairman of the Finance Ministry's civil service subcommittee that gives both merits and penalties to officials, has approved the dismissal of Siripong Riyakarntheerachote, whose last job was as a revenue officer in Narithiwat province and who was formerly employed as a revenue officer in Bangkok's Area 22.
Prasong Poontaneat, the Revenue Department's incumbent director-general, said the system prohibited officials from engaging in tax return fraud and any perpetrator would be caught by the information technology system.
Tax returns have standard criteria that can be checked. There are also guidelines for VAT refunds, but a big fraud has occurred because wrongdoers have not complied with the department's practices.
Until recently, 22 revenue officials were under investigation, but one has passed away. One official has been dismissed from the civil service and the Finance Ministry will file both civil and criminal lawsuits against this individual.
The Criminal Court has issued arrest warrants for five people — Veerayuth Saelok (also known as Thanayuth Dolachonkoset), Saitarn Saelok, Kittisak Aunyachote, Prasit Aunyachote and Surachet Maharumruek.
All are considered to have attempted to avoid VAT payments and to have committed actions considered as falsehoods.