FBR says conditions for tax exemption not met, company contests claim. CREATIVE COMMONS
A dispute between tax authorities and TransAsia Refinery Limited – an offshoot of Al-Ghurair Group – has deepened over payment of Rs1.7 billion after company officials met Finance Minister Ishaq Dar, apparently requesting him to influence the outcome of the case.
The company’s move to seek political solution to a business problem has annoyed the tax authorities, according to sources in the Federal Board of Revenue (FBR) headquarters.
Responding to queries sent by The Express Tribune, Sameera Fernandes, Group Corporate Communications Manager of Al-Ghurair Investment Limited, neither denied nor confirmed the meeting with Dar.
“As an active foreign investor, we had several meetings with different officials in Pakistan and we regularly plan to meet all related stakeholders who are relevant to our business and investment in the country,” she responded.
Rana Assad Amin, spokesman for the Ministry of Finance, said the finance minister would never direct the FBR to extend unlawful relief to any business entity. But he also did not confirm the meeting.
The Al-Ghurair Group of UAE had in 2005 incorporated TransAsia International (TRL) to set up a refinery at Port Qasim, Karachi with production capacity of 100,000 barrels per day. TRL entered into an agreement with its sister organisation, Al-Ghurair Invesmtent, for the import of a second-hand plant from Italy.
TRL’s 75% shares are held by TransAsia International Dubai, which is a subsidiary of the Al-Ghurair Group.
“After a lapse of six years, not a single brick has been erected at the project site,” said FBR documents. Tax authorities came to know about the affairs of the company after the FBR’s Directorate of Intelligence and Investigation started probing the matter.
The documents revealed that the company imported obsolete plant and equipment and evaded Rs1.4 billion in sales tax at import stage by illegally claiming exemption under a Statutory Regulatory Order, which is meant to support industrialisation in the country.
According to the documents, two key conditions set to take benefit of the SRO are that plant and machinery imported by the unit should be used for setting up an industrial unit and also the importer should submit a complete list of goods to be imported at first partial shipment.
The FBR said TRL did not fulfill both the conditions and was liable to pay Rs1.4 billion in taxes along with penalties. The case is pending in the Karachi tribunal.
The FBR also demanded Rs400 million on account of withholding tax that the company had to deduct including Rs289 million from mobilisation advance that TRL paid to Al-Ghurair Investment.
But the company has challenged the tax authorities, saying the claim of Rs1.34 billion sales tax evasion was “inaccurate”.
“We have invested more than $170 million so far and are going to invest even more to complete this project and after investing all this why would we risk breaking the rules,” wrote Sameera Fernandes.
However, the FBR refutes the investment claim. In its income tax returns, the company showed Rs16 billion worth of work in progress but on the ground not a single brick had been placed, it said.
Fernandes said according to applicable laws, the company was exempted from sales tax at import stage.
But the FBR’s findings suggest that the company evaded taxes in the name of bringing foreign investment.
In its written response, the company could not give the reasons that delayed the installation of the plant. Fernandes stated the plant was imported by the end of 2011 and currently, the company was in the process of awarding contracts to install the refinery.
The FBR claimed that the company imported a plant that would complete its life in 2016. But Fernandes said according to Bureau Veritas – a world leader in testing, inspection and certification – the refinery has over 10 years of life from the date of starting operations. “Moreover, in July 2013, we arranged yet another third-party inspection for internal parts of the refinery and the results were positive.”
Published in The Express Tribune, February 23rd, 2014.
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the concept of paying taxes seems a bit foreign (even to foreign companies). Offcourse, when people are being forced to pay tons of monies as khums by the religious cult mafia, then offcourse, it is difficult to pay taxes.
Al-ghurair is an honest investment company. The problem right now is that Mr. Ishaq Dar is desperate for dollars to save the sinking foreign exchange reserve. He will lose this battle; the UAE is a major foreign investor in Pakistan now FBR is monkeying around with them. I think better use of the FBR Directorate of Intelligence would be for them to chase down all the feudals and politicians who are evading taxes.