This is because when you are roaming, the data traffic goes through an encrypted tunnel to your carrier. There's not much China can do without completely blocking roaming traffic. It's not a big deal though because vast majority of Chinese people don't have access to a foreign mobile line. As long as China can control what 99% of the population can access, it's already a win.
I read this kind of comments in mainland's internet forums as well. People opposing this theory said that it should be the national tax authority handling this, not a local police department. Considering the local government did something crazy previously as well (collect fees from local corporations by threatening them), this seems like a problem with the local government instead of a nation-wide thing.
It's an important detail that this guy is using VPN to work from home, not at work for a company.
You can find pirated American TV shows and movies on china’s internal internet. No need for a VPN. Quite the opposite really, it’s much harder to find those things outside of China.
When I travel to China with a mobile phone subscription that supports roaming, I get completely uncensored access to the internet. Surely this is according to Chinese rules.
Likewise all the expats and Chinese I have met all used whatever they wanted of US social media plus they had a shit ton of pirated(?) American TV shows and movies.
Perhap the policies are changing? I don't know but this particular case sounds like a very modest fine (200 yuan) for using a VPN and sizeable fine for not reporting (and being taxed on) a foreign income.