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Abdulsalah Yuneus, the United Kingdom (UK) based
general manager of Libya Oil Ethiopia, has requested
an arbitration settlement on the condition that
Ethiopian Revenues and Customs Authority (ERCA)
removes the interest and penalties, senior officials
told Fortune.
The senior executive, who recently arrived from
London, had a three hour discussion with Melaku
Fenta, director general, and a senior official from
the law enforcement department. Yuneus met with
these top officials personally after a discussion
with officials from the tax audit and law
enforcement departments.
Yuneus’ visit is an attempt to settle the dispute of
Libya Oil’s tax arrears.
ERCA had posted a tax assessment notification on
April 2011, claiming a total of 210 million Br in
tax arrears, of which 105.2 million Br comes from
dividend taxes, alleging that the oil company did
not disclose the actual sale price from Shell
Ethiopia. ERCA accused Libya Oil of not paying taxes
accordingly, after acquiring assets and the
operation from Shell Ethiopia, which closed up shop
in the country after its parent company withdrew
from Africa's downstream market in 2008.
The interest rate used by ERCA is 25pc greater than
the highest commercial lending interest rate that
prevailed during the preceding quarter, and interest
was accrued from the date that the taxpayer was
obliged to pay the tax due, according to the income
tax law.
Accordingly, around 18pc is added as interest rate
on the principle tax, according to sources inside
the Large Taxpayers Offices (LTO) of the ERCA.
Of the dividend tax, the original taxed amount is
39.1 million Br, while the interest is 19.7 million
Br, and the penalty is 46.3 million Br, according to
sources.
Interest is always included for delayed payments and
cannot be waived, but provided that the company is
willing to pay the interest, a significant
percentage of the penalty may be waived, according
to the official.
Shell has transferred all of its downstream assets
and operations in Ethiopia to Libya Oil for 99
million Br, after paying seven million Br in capital
gain tax. ERCA, however, claims that the actual sale
amounts to 323 million Br, claiming that it has
acquired evidence which states the actual
transaction amount from British Customs, Her Majesty
Revenues Authority of London.
ERCA claims 191 million Br of capital gains tax,
including interest and penalties. “Had they declared
the actual amount, they should have paid 16 million
Br,” the official said.
Yuneus, who is also one of the three Libyan
shareholders, argues that his company cannot be
liable for capital gains tax, which should have paid
by the Shell Petroleum Company, which was the
transferor of properties.
ERCA holds the company criminally liable for the
capital gains tax, and for intentionally failing to
disclose the actual sale amount, and is asking for
damages that the authority incurred because of the
non-disclosure, according to an official from the
legal department.
The authority has the copy of the contract agreement
that the two companies have signed as evidence for
the non-disclosure of details of the agreements, the
official claimed.
The oil company has been filing appeals to different
government offices including the prime minister’s
office, claiming that the payment ERCA is demanding,
will force the company to surrender their operation
in the Ethiopian market.
To date, Libya Oil has close to 200 employees and
supplies petroleum to 180 retail stations across the
country. The company also has 146 capital
investments in the country, and has paid 109 million
Br in taxes to ERCA from 2008 to 2010, according to
data from the company.
The oil company has also filed a complaint with the
Review Committee, which is accountable for ERCA, on
the assessment of the taxes, but the committee
affirmed the assessment of the authority on July 13,
2011. Libya Oil received the decision of the
committee an a letter signed by Asfawossen Asfaw,
manager of ERCA's LTO.
The company has to appeal to the appellate
commission, which is accountable to the Ministry of
Justice (MoJ), within 30 days after the decision of
the review committee, after paying 50pc of the
amount claimed by the authority.
However, the representatives from the private sector
who were selected from the Ethiopian Chamber of
Commerce and Sectoral Associations (ECCSA) did not
attend the sessions, the official claimed.
This was one of the debatable issues during the
first public private dialogue forum on tax issues
held in February 2011. ERCA officials attending the
forum were alleging that a total of three letters
were written to the chamber requesting to select a
representative, but they have not responded.
ERCA officials had advised the UK manager on the
best course of action for his company. “Options
other than an arbitration settlement will not be a
wise decision for the company, as the authority has
ample evidence about the details of the
transaction,” the official claimed.
Managers of Libya Oil have refused to comment on the
matter. |
