Pakistan catches Chinese firm evading Rs1.12b in taxes

[Devil Soul]

Pakistan catches Chinese firm evading Rs1.12b in taxes
By Shahbaz Rana
Published: May 15, 2018
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The scrutiny revealed that the company imported 14 consignments since 2016. Out of these 14 consignments, four got cleared against payment of duty and taxes. PHOTO: FILE

ISLAMABAD: Pakistan’s customs authorities have caught a Chinese company that supplies coal to the 1,320-megawatt Sahiwal Power Plant evading Rs1.12 billion in taxes on its imports, but the tax machinery is reluctant to file a criminal case due to sensitivities attached with the China-Pakistan Economic Corridor (CPEC).

Despite the fact that the company has admitted its fault and deposited Rs1.2 billion in the exchequer last month, the Federal Board of Revenue (FBR) is reluctant to register a criminal case against Huaneng Fuyun Shipping Company owing to ‘national interests’.

The case highlights the magnitude of challenges authorities are facing in dealing with Chinese firms.

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The first investigation report has not been registered against Huaneng Fuyun Shipping in ‘national interest’, said an FBR official on the condition of anonymity.

The Model Customs Collectorate Port Qasim, Karachi, unearthed the case of evasion of duty and taxes by Huaneng Fuyun Ports & Shipping, according to FBR’s documents. The company belongs to state-owned China Huaneng Group. Another sister company of the Group, Huaneng Shandong Ruyi (Pakistan) Energy (Private) Limited, has built the 1,320MW Sahiwal power plant under the CPEC framework.

On Pakistan’s National Day, Prime Minister Shahid Khaqan Abbasi signed the “Outstanding Achievement Award” for the Huaneng Sahiwal Power Station, according to the China Huaneng Group’s website.

China Huaneng Group is a key state-owned company established with the approval of the State Council. It does business in development, investment, construction, operation and management of power sources; finance and energy transportation.

The company imports coal and supplies it to the Punjab-based power plant. The customs authorities took action after they came to know that the company utilised machinery imported during fiscal years 2016-2017 without filing of Goods Declarations (GDs) and payment of duty and taxes.

A team of customs officials comprising Chief Collector-Appraisement (South) Rasheed A Sheikh and Collector MCC, Port Qasim Muhammad Javaid carried out detailed scrutiny of the company’s imports.

The scrutiny revealed that the company imported 14 consignments since 2016. Out of these 14 consignments, four got cleared against payment of duty and taxes but 10 were utilised without fulfilling due process of law and payment of duty and taxes, according to the FBR documents.

These consignments did not leave the port premises and were used for development of a dedicated coal terminal at Port Qasim for uninterrupted coal supply up to the country to Sahiwal power project.

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The FBR has recovered duties and taxes on the imports of ‘Coal Belt Conveyor’ and ‘Railway Track Fittings’ to the tune of Rs237 million. The taxes and duties worth Rs885 million have also been recovered against eight consignments of different machinery and equipment, said the officials.

The company has admitted its default and agreed to pay the evaded amount of duties and taxes worth Rs1.12 billion, which the authorities believed was one of highest tax recovery in a single case at the import stage.

Although the FBR is reluctant to register an FIR against the firm, it has started other legal formalities for recovery of penalties on the evaded amount of duties. The collector has further directed to identify and nab culprits involved in the scam.

The evasion of duties by the Chinese firm is not an isolated case, as tax authorities also face challenges of misdeclaration of goods under the guise of imports for the construction of projects of CPEC, said sources in the FBR.

There are also issues in making the web-based one custom (WEBOC) system operational at Gwadar port to book imports arriving for the purpose of CPEC projects. The FBR is facing pressure to let the port function on a relatively unsecured system of One-Customs due to delay in operationalisation of the WEBOC, said the sources.

The FBR is also resisting pressure from Gilgit-Baltistan against its decision to make the WEBOC operational. The pressure is coming from the Pakistani importers, as the web based system would address the issue of under declaration of value of goods being imported from China, said the sources.

According to some estimates, the value of the imports from China is understated by about $4 billion.

Published in The Express Tribune, May 15th, 2018.

 

[Ryuzaki]

Important excerpts from the article-

"tax machinery is reluctant to file a criminal case due to sensitivities attached with the China-Pakistan Economic Corridor (CPEC)."

"reluctant to register a criminal case against Huaneng Fuyun Shipping Company owing to ‘national interests’."

 

[Sharky]

Chinese are doing a big favor. Pakistan should not jeopardize the good will over such trivial things.

 

[I.R.A]

Important excerpts from the article-

"tax machinery is reluctant to file a criminal case due to sensitivities attached with the China-Pakistan Economic Corridor (CPEC)."

"reluctant to register a criminal case against Huaneng Fuyun Shipping Company owing to ‘national interests’."

I haven't read the article but tax authorities cannot register a criminal case or FIR be it Chinese or non Chinese, the max they can do is conduct an audit, reassess and raise a tax demand, or worst attach bank accounts for recovery ..... the taxpayer involved has each and every right to appeal against that demand and file for a stay against forceful recovery.

Chinese are doing a big favor. Pakistan should not jeopardize the good will over such trivial things.

You would do a bigger favor by keeping shut.

 

[AMCA]

I haven't read the article but tax authorities cannot register a criminal case or FIR be it Chinese or non Chinese, the max they can do is conduct an audit, reassess and raise a tax demand, or worst attach bank accounts for recovery ..... the taxpayer involved has each and every right to appeal against that demand and file for a stay against forceful recovery.

Come on !! of-course they can approach judiciary. I am sure your constitution guarantees them that right, if not, then god save Pakistan.

 

[Turingsage]

Taxes are trivial when dealing with big brother, and Pakistan should never rock the boat. It must realise its role is to be the compliant sucker being taken on a long costly ride to that mole hill of economic servitude.

 

[I.R.A]

Come on !! of-course they can approach judiciary. I am sure your constitution guarantees them that right, if not, then god save Pakistan.

Normally there is a separate act / ordinance for taxation ........ and they (taxation authorities) have their own appellate forums to decide the cases ....... Commissioner Appeals, Appellate Tribunal and finally if there is a question of law that needs higher courts hearing.

Read your own Indian Tax laws, we most probably have the same laws ...... Tax authorities don't need to register an FIR for recovery, they have the powers under Income Tax Ordinance 2001 as applicable in Pakistan.

Come on ......... please.

 

[pak-marine]

the tax machinery is reluctant to file a criminal case due to sensitivities attached with the China-Pakistan Economic Corridor (CPEC).

what sensitivities its business

 

[India Pakistan]

Small things are bound to happen in larger than life projects

 

[Trango Towers]

If the company had admitted liability...no point in a criminal case. Just fine them and keep a close eye. Charge interests late payment as well. Or make them build a hospital school etc

 

[RIP Pak LAW]

Despite the fact that the company has admitted its fault and deposited Rs1.2 billion in the exchequer last month,

Good. Now for heaven sake, FBR should also catch tax evading Pakistanis and their million dollars business empires running through out the country.

 

[AMCA]

Normally there is a separate act / ordinance for taxation ........ and they (taxation authorities) have their own appellate forums to decide the cases ....... Commissioner Appeals, Appellate Tribunal and finally if there is a question of law that needs higher courts hearing.

Read your own Indian Tax laws, we most probably have the same laws ...... Tax authorities don't need to register an FIR for recovery, they have the powers under Income Tax Ordinance 2001 as applicable in Pakistan.

Come on ......... please.

Here in this case, the FBR has already found a fraud happening. I am not sure how it is in Pakistan but here in India, we take judicial proceedings against the company, mostly it ends up with the CBI.

 

[UserUnknown2025]

There’s no need to look at China as a big brother. If a firm violated the law, it should be punished regardless of its origin. I’m sure the Chinese understands this.

 

[Rizwan Alam]

There are countless loopholes in WEBOC and our tax system. Any one would try to use them and save some bucks, and Chinese company was not an exception but finally they deposit the money. End of the story!!

 

[prashantazazel]

Here in this case, the FBR has already found a fraud happening. I am not sure how it is in Pakistan but here in India, we take judicial proceedings against the company, mostly it ends up with the CBI.

No. If you're dodging taxes, you typically get a notice from the IT department.