Importer charged with tax evasion

Tax: An importer in Phuentsholing, the country’s commercial hub, has reportedly evaded sales tax and customs duty amounting to more than Nu 11.045 million (M) for goods imported from third countries.

The proprietor of Yoezer Import House, Leki Dema, had imported goods worth Nu 55.476 million (M) between 2009 and 2015 by using 10 import licenses belonging to nine individuals as per records maintained by the Regional Revenue and Customs Office in Phuentsholing.

The Office of the Attorney General (OAG) on August 29 filed a criminal case against Leki Dema at the Phuentsholing dungkhag court pleading to restitute the evaded tax amount of Nu 11.045M from the defendant. The prosecution also submitted that Leki Dema, who is charged with 10 counts of tax evasion, is also liable for the offense of tax evasion, which will be a value-based sentence.

The Penal Code’s section 283 states that a defendant shall be guilty of the offense of tax evasion if the defendant refrains from paying taxes which he/she is supposed to pay or illegally pays less tax than the law permits, or commits fraud in filing or paying taxes.

The prosecution submitted that the accused purposely and knowingly did not declare a consignment of Yoezer Enterprise valued at Nu 0.435M, Nu 0.597M for Choney Tshongkhang, Nu 0.633M for Kezang Tshongkhang, Nu 1.677M for Tshelrab Tshongkhang, Nu 1.348M for Yoezer Import House, Nu 0.972M for Rigsel Enterprise, Nu 0.256M for Seldon Enterprise, Nu 0.627M for Keenam Tshongkhang, Nu 0.426M for Sangay Choden Tshongkhang, and Nu 0.698M for Choki Tshongkhang.

As per chapter 4 section 16 (kha) of the Sales Tax, Customs and Excise Act of Bhutan 2000, a fine of 50 percent of the value of the goods in addition to the amount of sales tax, customs and excise duty shall be imposed for non-declaration, mis-declaration or concealment of goods.

“Therefore, by considering the average percentage of Bhutan Sales Tax (BST) of 10 percent and customs duty of 30 percent, Leki Dema is liable to pay Nu 5.925M for not declaring the consignment over the period of seven years,” the prosecution submitted in writing to the court.

The accused is also liable to pay 24 percent per annum, which comes to more than Nu 5.170M.

The Anti-Corruption Commission (ACC), while investigating the possible fraud and corruption in customs administration and business operation, found that Leki Dema had either not declared or under invoiced the consignment between 10 percent to 15 percent worth of consignment in order to avoid sales tax and customs duty.

During the course of the investigation, the ACC seized emails of Tsheltrim Rabten of Tshelrab Tshongkhang and revealed that Leki Dema with the help of Tsheltrim Rabten had knowingly devalued the total worth of goods by 10 to 15 percent in every consignment and evaded tax.

For instance, Leki Dema had imported knockdowns from Thailand on July 1, 2014 and the original bill issued by CKC had reflected a larger sized knockdown as 860 Baht and for smaller ones as 620 Baht. However, for the customs declaration they had prepared invoices by themselves and reflected the unit price of knockdowns as USD 7.6, irrespective of the size, which is almost 300 percent less than the actual price.

ACC’s findings states that due to restriction on import houses to import one 20 feet container or equivalent once in every three months as per the Bhutan Import House Guidelines 2005, importers resorted to obtain licenses in their relatives’ names and hired several import licenses in the name of Bhutanese individuals to import goods from third countries without having to comply with the restriction.

OAG also filed a civil case against nine other license holders, who allowed Leki Dema to use their import licenses, to revoke licenses and impose a fine of Nu 10,000 each.

General guidelines for industrial and commercial ventures in Bhutan 1997, prohibited a licensee from leasing out “a license to another person in any form or manner”. “Violation of these rules shall result in payment of a fine of Nu 10,000 and immediate cancellation of the trade license. Such violators shall not be eligible for any category of licenses in the border towns thereafter.”

The ACC had recommended the OAG to charge Leki Dema for tax evasion as well as passive and active commercial bribery. According to ACC officials, any facets of business essence involved in fronting is clearly captured in section 66 (1) of ACAB that says: “Any person who, in course of economic, financial or commercial activities, promises, offers or gives, directly or indirectly, of an advantage to any person who directs or works, in any capacity, for a private sector entity, for the person himself or herself or for another person, in order that he or she, in breach of his or her duties, act or refrain from acting shall be guilty of an offense”.

Other license holders were charged for official misconduct on the grounds that license holders in Phuentsholing, Gelephu, Samdrupjongkhar and Samtse towns had violated their commitment. As required by procedure for liberalisation of trade and service, licensees signed the undertakings explicitly stating that they will not engage in fronting as per Rules and Regulation for Establishment and Operation of Industrial and Commercial Ventures in Bhutan, 1995.

The ACC began investigation of commercial bribery and tax evasion cases on April 20, 2015. As of now, more than 40 fronting cases were registered with the Phuentsholing court.

Rinzin Wangchuk

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