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Years of Customs investigations go waste By Chandani
Kirinde There is growing
disquiet within the Department as years of hard work that has gone
into prosecuting offenders have ended abruptly as a result of the
amnesty. The Sunday
Times learns that the revenue lost to the state in Customs taxes
and fines on some of the top companies soars to Rs. 18 billion while
the amount lost from smaller offenders is around Rs. 9 billion. The taxes and
fines had been imposed for abusing provisions of duty waiver and
exemption, non-payment of duty, under valuation and false declarations. According to Customs data, Free Lanka Trading had been imposed a cumulative tax amounting to Rs. 45, 000,000 for three different cases involving false declarations, forced invoicing and pilferage and shortage. Mercantile Shipping Ltd had to pay Rs. 166, 109,774 and Off Shore Marine Rs. 35, 005,483 for non-payment of duty while IDAC (Pvt) Ltd owed the state Rs 3, 175,239 for under valuation. (See Customs list.) Following are
some of the other offenders, against whom cases have already been
filed in courts for customs violations and the case value respectively.
Ceylon Grain Elevators (Rs. 1,200 million), Mans Lanka (Pvt) Ltd
(Rs. 2.8 million), Stassen Exports (2.8 million), and Boskalis International
(Rs.141 million). However there are hundreds of other cases which
are being inquired into. Among the cases which have been delayed
in court for various reasons is the case pending against Stassen Group
of Companies. In one instance, the Director General of Customs requested
a postponement of investigations for three months stating that a
new prosecuting officers had been appointed as the previous officer
had gone abroad. In July 1998 the Stassen Group obtained a
stay order bringing the Customs probe to a halt. The stay order
was varied from time to time enabling the Customs Department to
lead the evidence of three witnesses who took part in the raid. Also among
those benefiting from the amnesty are two leading banks, which have
gone to the Court of Appeal, challenging the Customs duty imposed
on them for alleged involvement in duty fraud in software importation. According to
a senior Customs officer, though many of the offenders institute
action in courts, the ruling has been in favour of the Customs in
99.9 percent of the cases. The official, who wished to remain anonymous,
said that some of the cases that would be withdrawn as a result
of the amnesty had been pending for about six years and a lot of
hard work had gone into the investigations by the Department to
prosecute the offenders. However, the
long drawn out court cases have been proven beneficial to these
businessmen and companies with the amnesty coming into place. The officer said the present disillusion among the Customs officers was similar to one prevailed in the aftermath of the slaying of Customs officer Sujith Prasanna Perera in 2001. About ten officers left the department then. "The officers are disheartened that years of painstaking investigation have gone waste. There is irrefutable evidence against most of the big companies which owe the states billions in duties," he said. Meanwhile, opposition political parties say that this new Act violates the basic rights of the legitimate taxpayers who have been dutifully paying their taxes to the state. Asked why the case was not challenged in courts after it was tabled in Parliament, an opposition legislator admitted that they had little time to study the Bill in detail by which time the seven days allowed for them to challenge the Bill had lapsed. The new Act favours the rich; opposition mute When the Inland
Revenue (Special Provisions) Act was passed in Parliament on February
19, there were a few voices raised in opposition to warn of the
detrimental effect it could have on the country's economy. Two of the
parliamentarians who spoke against the Bill were former Finance
Minister Ronnie De Mel and the JVP's Colombo district MP Sunil Handunnetti
while most of the others chose to speak on the Employees Provident
Fund (Amendment) Bill that was debated along with this one. The
Bill was passed by a majority of 48 votes with 97 members voting
for and 49 against it. Mr. De Mel
said this all-embracing tax amnesty was unlike any others that have
come before. "None of the other (amnesty) bills was all embracing
like your Act. None of them covered exchange control, none of them
covered excise, none of them covered customs," Mr.De Mel said
adding that no such amnesties had been given anywhere in the world
and no tax amnesties were successful. "Is it
all right to pardon the biggest crooks in the country in this manner?
What of the people who pay taxes?. They are the losers while the
offenders are allowed to go scott free," he said. Mr. Handunnetti
criticizing the Bill said it would benefit only a handful of rich
and influential contributors to the UNF's party funds while the
state coffers would lose millions as a result of the amnesty. Finance Minister K. N. Choksy who introduced the Bill said the Bill was an improvement on all other amnesty bills passed before and the government would be able to collect its just dues as the number of defaulters would fall as a result of it. He said one
reason other amnesties had failed was because the declarants were
worried that if they were given an amnesty under one law, they would
still be prosecuted under other laws. In terms of
the provisions of this Bill, any person making a declaration will
enjoy full immunity from liability to pay tax, duty, levy, penalty,
fine or forfeiture under the statutes set out in the schedule to
the Bill administered by the Departments of Inland Revenue, Customs,
Excise, Exchange Control and the Department of Import and Export
Control. Among the Acts
included in the schedule to this Act are the Turnover Tax Act, the
National Security Levy Tax, The Goods and Services Tax Act and the
Customs Ordinance.(See list of schedule inside). Mr. Choksy
also gave a breakdown of the amounts recovered by previous amnesties
starting from 1964. That year, the amnesty resulted in 78 declarations
being made valued at Rs. 21 million. In 1965, there
were 575 declarants and Rs. 38 million was recovered; in 1978, there
were 160 declarants and Rs. 30 million was recovered and in 1989
there were nine declarants and Rs. 4 million was recovered. In 1990, under
the Specified Certificate of Deposits (Tax and other concessions)
Act No.45 of 1990, the state recovered only Rs. 960, 000. The Tax
and Foreign Exchange Amnesty Act No.4 of 1997 was more successful
with 100 declarants with the amount declared being Rs. 285 million.
In the 1998 amnesty, there were only seven declarants but the amount
recovered was Rs. 223 million. The largest
number of declarations was made under the amnesty granted by the
Inland Revenue (Special provisions) Act No.7 of 2002, which attracted
592 declarants. It will benefit people, says Bandula Deputy Finance
Minister Bandula Gunawardene said a few undesirables might benefit
from the tax amnesty granted by the new law but people could enjoy
long-term benefits of this amnesty by way of tax reductions. "This
move will widen our tax base and then people will have to pay less
in the form of indirect taxes they pay now," he said. Mr.Gunawardene also said he did not believe the revenue losses reported from the Customs as a result of the passage of this bill were that high as the Department did not successfully prosecute all the cases against alleged offenders of the tax laws. NDB, Mans react to our report With reference
to our last week's article headlined "Billions lost in Customs
Amnesty", the National Development Bank has sent the following
reply: "Contrary
to the information given in the above article, there is no case
pending against the Bank for non-payment of custom duty or, any
other reason. "However,
for sake of transparency the Bank wishes to note that there is an
action instituted by the Bank in the Court of Appeal, and the Bank
has been granted interim relief in relation to payment of GST (and
not Customs duty) claimed by the Sri Lanka Customs, for banking
software used by the Bank, NDB said in a statement." Reporter's
note: Under the new Amnesty offered taxes imposed under the GST
Act will also be waived off. Meanwhile,
Mans Lanka (Pvt) Ltd referring to the article states that the amount
due in customs duty by them is Rs 2.8 million and not Rs. 786 million
as stated in the article. It also says a case is pending in the Court of Appeal challenging the Customs Department on the imposition of this duty. |
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