Tax payment deepens over 1.7 Bn: FBR
Islamabad: FBR investigated about 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.
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.
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 this entire 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.
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.”