Tax Fraud by Foreign Companies in Ethiopia

This outgoing Ethiopian year presented scandals beyond belief and also hard news to Fortune readers related to court cases of tax fraud, acts of corruption, money laundering, engagement in areas not allowed for foreign investors, failure to pay value added tax (VAT), and working without having a business licence or work permit. Though similarly scandalous behaviour is familiar to Ethiopians, this year, foreign companies and their owners, managers, and workers operating in Ethiopia engaged in such activities.

The cases made against Tidhar Excavating and Earthmoving Ltd., Dubai Auto Gallery L.L.C and Auto World International Free Zone Plc along with one Ethiopian company called Okapi Impex Plc were typical examples.

Tidhar Excavation and Earthmoving Ltd., an Israeli company taking part in the 2.6 billion Br road projects including roads which were expected to supplement the ongoing Light Railway Transit (LRT) project, had been found illegal with tax evasion activities worth some 52 million Br in outgone year. The company committed the illegal act in cooperation with three employees of the Ethiopian Revenues & Customs Authority (ERCA) Large Taxpayers Office, who were finally arrested. They included the owner and general manager of Tidhar, Menashe Levy (right). Tidhar was engaged in constructing the Wuha Limat – 22 Mazoriya-Megenagna, Sidst Kilo- Ferensay, Wingate –Asko and Asko- Pastor road projects which still are not completed.

Other companies owned by Indians and Sri Lankans were charged with one billion birr tax fraud. They were found engaged in investment activities not allowed for foreign investors; were working without business license, without work permits, and were not paying VAT.

The accused were two United Arab Emirates (UAE) registered companies, namely, Dubai Auto Gallery L.L.C and Auto World International Free Zone Plc along with one Ethiopian company called Okapi Impex Plc. Five Sri Lankan and four Indian employees were convicted with the remaining suspects being from New Zealand and the United Arab Emirates.

They were charged with engaging in an investment activity that was not allowed for foreign investors. They were importing the small, three-wheeled vehicle known as Bajaj using the Ethiopian company as cover, without having a business license in Ethiopia. Some of the employees used false employment contracts of Okapi Impex Plc and the others were in the country on tourist visas making them ineligible for employment and rendering their trading as a criminal act, the charge stated.

Using such cover, they had been engaged from June 12, 2012, to September 29, 2013, in importing, wholesaling and retailing of Bajajs produced by their employer companies in the UAE. They were also found conducting a market survey for selling the product of the companies in different regions of the country.

Ashref Awel, owner of Okapi Impex Plc, was accused of giving cover to the 14 defendants by pretending that they were his employees when he knew that they were employees of the two foreign companies that had no licence to engage in that type of business in Ethiopia.

The three companies were also accused of hiding money amounting to 520 million Br in the bank account of the wife of Ashref, without paying business tax for two years.

The most serious charge involving the largest sum was tax fraud allegedly committed by an Indian suspect named Vishal Kumar, owner and general manager of Asia Afro Automobiles Plc, a Bajaj manufacturing and assembly company. The company went bankrupt on February 28, 2000. He was engaged on wholesaling and retailing of the vehicles in Ethiopia without having licence. He earned 350.8 million Br from his illegal business without paying VAT, the charge claimed.

Published on Sep 07,2015 [ Vol 16 ,No 801]



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