A young man from a wealthy family joined his parents’ MNC group after graduating from a world’s famous university. He had studied global finance and wealth administration.

His parents decided to admit the young man in the top management team of the group, responsible for global business development. This was very common in family businesses but could make any young people being spoiled.

The proactive young executive soon found that the group, on a global basis, had been paying a high effective tax rate of about 20~24% in the past 10 years. The group had a few large production bases in the mainland and goods manufactured under an ODM basis were mostly exported through a trading arm in Hong Kong to many western countries.

The young man thought he had “excellent” knowledge in global finance. In order to demonstrate his high capabilities to his parents, he worked with his finance team to devise a vigorous tax minimization scheme which might reduce the effective tax rate payable by the group down to 12%! Nevertheless, the world was not as simple as this young tycoon thought.

In the third year after launching the tax scheme, this man was detained at an immigration border in the mainland for suspected tax evasion. He was so astonished at the border when being arrested and was put into a jail of unbearable conditions with many terrifying criminals.

This poor man was temporarily released from the jail after his parents had paid certain “deposits” amounted to $10 millions. The primary reason for this unexpected blow was because of the cooperation between the tax authorities of the two places to spot abnormalities in the subsidiaries’ financial statements and tax returns filed in the mainland. No one could be more clever than the tax officers. You have to believe this.