Almost a year after the finance ministry forwarded an alleged misuse of import exemption granted to the Hotel Riverside in Changbangdu, Thimphu, the Anti-Corruption Commission (ACC) on August 2 reverted the case to the ministry for necessary action.
The commission, however, has asked the ministry to take an administrative or legal action against two individuals, Pema Namgay and Thinley Wangchuk, as the information the ACC gathered through its investigation has some merit to the ministry in deciding the next course of action.
The commission stated that the disputes that arose from the internal contract between Pema Namgay and Thinley Wangchuk were more of a civil matter, which should not affect the tax authority from proceeding with its own motion of taking administrative or legal action. “The finance ministry and in particular, the Tax Appeal Board (TAB) should be the competent authority to take this matter to its logical conclusion based on its laws and regulations in place,” the ACC’s letter to the finance secretary stated.
Finance Secretary Nim Dorji wrote to ACC on September 18 last year after the TAB recommended the ministry to forward the case to the commission. The letter also stated that the exempted goods were not found at the premises of the Hotel Riverside during the post clearance audit and the co-proprietor of the hotel, Pema Namgay, denied having imported goods from China.
Pema Namgay had told the post audit team from the Regional Revenue and Customs Office in Thimphu that someone had illegally imported goods in the name of the hotel and misused the exemption.
“All these findings indicate element of corruption and hence require a detailed investigation,” the finance secretary stated in the letter to the ACC chairperson. “Since the case has elements of corruption and the Ministry of Finance lacks expertise to carry out such an investigation, we would like to forward the case to your agency.”
ACC officials said that the commission did not find any element of corruption to continue the investigation further. “That is why the commission returned the case to the ministry for necessary action like collecting duties and imposing fine and penalties,” ACC officials said.
The co-proprietor of the hotel, Pema Namgay and Wangchuk applied for import license to the Tourism Council of Bhutan (TCB) on June 20, 2014. The TCB recommended the issuance of import license to the trade department.
The trade department on June 23, 2014 issued import license to Hotel Riverside against goods worth USD 83,270 of Nu 5.049M. The goods mainly consisted of furniture and fittings to be imported from China.
The consignment arrived in Phuentsholing on August 11 and the Customs cleared the goods on August 19, 2014.
About two years later, on August 12, 2016, the Regional Revenue and Customs Office (RRCO) in Thimphu conducted the post clearance audit at Hotel Riverside and detected several items imported through tax exemption missing from the audit site. Accordingly, the RRCO imposed Nu 4.159M on the hotel in duties and penalties against the missing items.
According to the Tax Act, all exempted goods shall be subjected to post clearance audit at any point of time.
The ACC conducted a preliminary investigation and established that following the tax exemption; Pema Namgay blatantly denied both having imported the goods from China and availing tax exemption.
In an earlier interview, Pema Namgay told Kuensel that he had given supply order worth Nu 12.2M to furnish 60 bedrooms, including supply of beds and mattresses to his close friend Thinley Wangchuk based on quotation submitted in the name of Lhathing Enterprises.
He had said that he paid Nu 12M to the supplier to deliver goods and furnish hotel bedrooms of buildings A and B in 2014. The supplier delivered and furnished orders worth only Nu 6.941M, out of which he rejected materials worth Nu 2M, he added.
He also alleged that Thinley Wangchuk had availed fiscal incentive or the tax exemption of Nu 6.3M based on the quotation of Nu 12.2M by forging his and his nephew Wangchuk’s signatures and documents. Pema Namgay had also claimed that he knew about the misuse of tax exemption only after he applied to TCB for tax exemption certification worth Nu 1.2M for two elevators, curtains and kitchen utensils.
The commission’s investigation focused on establishing whether Pema Namgay had any knowledge at any point before the post clearance audit about Thimley Wangchuk having fraudulently processed the tax exemption for Hotel Riverside.
It was found that the import exemption was processed through Tax Tashel system using the user ID email@example.com, which was created by Thinley Wangchuk in 2014 in the name of Hotel Riverside. The same user account was later used by Pema Namgay for processing sales tax exemption for goods imported from India in 2015. “This evidence repudiates Pama Namgay’s submission to the tax authority that he was totally unaware about the import from China in his hotel’s name,” the ACC letter stated.
Pema Namgay claimed to have placed supply order to Lhathing Enterprise, which belongs to Deki Yangzom. In contradiction, both Deki Yangzom and Thinley Wangchuk who is her husband’s nephew claimed that they arranged the letterhead of Lhathing Enterprise for Pema Namgay to avail his loan from financial institutions.
The ACC also established that Pema Namgay released four cheques amounting to Nu 12M in 2014 to Thinley Wangchuk against the bills of Lhathing Enterprise for which Thinley Wangchuk could not explain or comment on the payments.
The investigators inspected Hotel Tara Dolma, erstwhile Hotel Densa, which was hired by Thinley Wangchuk from Dechen Pemo in November 2014, and found that certain items like bed and mattresses, which are same as the ones found in Hotel Riverside indicating diversion of goods by Thinley Wangchuk.
ACC officials said that the commission did not find any indication of the finance minister influencing Pema Namgay, who is his brother. Thinley Wangchuk had alleged that Pema Namgay had taken advantage of the finance minister and played with the system to avoid tax issues.