Grade one contractors in hot water for audit gaps

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Prominent local and international construction companies are being investigated under suspicion of tax evasion and tax fraud by the Ministry of Revenue (MoR).
Among the 33 large tax payer firms, multiple local and international construction companies were forced to pay more than two billion birr. Many of these firms have settled or are expected to pay their huge accrued tax bills to the Ministry.
Last week Capital reported that the Federal Police were undertaking an operation investigating the companies based on the Ministry’s audit report. Federal Police started investigating audit reports made last fiscal year but also reports from previous years as well.
The China ACMC Engineering Corporation P.L.C. was asked to pay 736.2 million birr which it later appealed and paid. Teklebrehan Ambaye was asked to pay the gap of 222.3 million birr discovered by the investigation audit while, China Railway Group LRT project was asked to pay 255.4 million birr.
Although some of these companies have already paid their back taxes, police continued investigating the audit in suspicion of existence of criminal activity.
The Ministry had previously sent the files to the Bureau of Investigation and the concerned department after examination had closed the case and reported its findings through a letter to the Ministry stating that there were no crimes found.
Employees of the Ministry however opposed the decision of the investigation bureau stating that the decision has to be made after a proper investigation has been conducted.
Following the reform of the executive police by the government of Prime Minister Abiy Ahmed (PhD) some closed files were re-opened.
“We were discouraged by the actions of the police and we were even feeling that the audits we make are useless,” an employee at the Ministry told Capital.
Orbit Construction’s two year audit had presented a 26 million birr gap from what they allegedly declared, but following their appeal to the Ministry, the amount was lowered to seven million birr according to Bekalu Menda, General Manager of the company.
“The investigation must be for a one million birr transaction made with a man who delivers sand for our site,” said Bekalu. “We understand he has printed receipts without the approval of the Ministry; and he is still working! If the Ministry wants to find him they can. But we paid that difference also to claim it back from him.”
The same thing happened with General Mercantile PLC which was expected to pay 17.75 million birr.
“We paid the claims through bank loan which has a 10% lower interest than the Ministry,” said Girma Kebede, owner of the company. “We purchased some spare parts, iron and cement but the receipts were not accepted by the Ministry. We made a claim to the Ministry but they say that it’s not their duty to check the legality of receipts issued with their machine.”
The Ministry announced this month that it does not know the whereabouts of over 400 cash register machines that are functioning in the country but are not connected with their server. These machines, they claim are printing receipts without transactions. The former Deputy Director Netsanet Abera confirmed to Capital that the receipts are not only being used for evading taxes but in addition the taxpayers have asked for tax refunds from the Ministry using these fake receipts.
“The problem has hit the innocent tax payers as well but many used it to reduce their cost,” said Netsanet at the press conference. “The ministry is also having dialogues to change or update the existing system and to paralyze the machines.”
“Whenever we found illegal receipts or similar transactions we sent the findings to the police to investigate if there were criminal elements including the intention of the companies,” said sources at MoR. “The legal enforcement, prosecution and the judiciary have to collaborate to bring all transactions to the legal scheme.”
Melcon Construction Plc faced a 78.4 million birr penalty and Bokera Construction was asked to pay 61.5 million birr. Orchid Business Group PLC was also asked to pay 55.5 million birr while Gemshu Beyene Construction PLC was asked to pay 74.2 million birr of an audit gap.
CREC was required to pay 64.41 million birr, and Get-As International received the 26.31 million birr audit gap.
Zong Mil Engineering Group, Satcon Construction PLC, Hunan Hunda Road, Fincha Fuafuate, HAWK International Finance & Construction Co. Ltd, are also on the list of those being investigated and expected to settle the amounts of 37.3 million, 35.6 million, 13 million, 4.1 million, 2.4 million birr respectively.
The large tax payers office affirms the actual tax remaining to be paid until the end of last week is 340,689,348.73 birr. The same statement revealed that the authority lifted a penalty of 83,567,867.01 birr and the amount paid by some has reached 349,156,679.67. “About 340, 689,348.73 birr is pending as the companies have appealed to the head office,” declared the statement.
The government has claimed that forged receipts and illegal vat reimbursement have become a threat to tax collection. It has also cautioned the business community that it will not tolerate illegal acts and will take measures on those involved.