You'll never guess where.
Things work differently in China. Most Chinese accept that but those with money don't because, well, money can buy alternative solutions. Take buying supercars and other luxury vehicles, for example, which can cost double in China due to manufacturer markups and taxes. Bloomberg has learned that wealthy Chinese, including gangsters, are hiring buyers in Vancouver, Canada to actually purchase vehicles for them, export them to China, and then claim millions of dollars in sales tax refunds.
You wouldn't think Vancouver would be the place where shady dealings like this are happening. But they are and business is thriving.
The provincial government is currently investigating all of this dirty money but it's unknown whether much can be done about it because – wait for it – it's not entirely illegal.
Here's how the scheme begins: once a straw buyer (a local nominee takes with purchasing the car) makes the purchase on their overseas client's behalf, they immediately export the vehicle. This buyer then claims the sales tax refund for as much as 20 percent of the purchase price. That's actually the legal part.
Where it gets shady is the method people use to purchase the vehicles. Instead of, for example, a bank transfer, purchases are made in cash or with bank drafts. This keeps the real buyer anonymous and therefore authorities have no way of tracing them. Think of this whole thing as trade-based money laundering.
The practice has become very popular, reaching over 4,400 grey market vehicles exports to China in 2018. There were less than 100 in 2013. During that five-year period, the province refunded nearly $63 million USD in sales taxes. It even had to hire additional staff to handle all of the applications. In fact, many of those filing refund applications couldn't even speak English, presenting Chinese passports instead of local driver's licenses. There was one straw buyer trying to get refunds for over 25 vehicles.
Canadian authorities first began investigating for one very simple reason: there were too many high-priced supercars and luxury cars in the city. A majority of residents could never afford such purchases. One car dealer admitted "we are selling way too many luxury and premium cars for this economy, for what people earn here." That's because the cars aren't bought by locals, but rather by rich Chinese trying to beat the system.