91 million Br is owed in dividend taxes after Oil Libya acquired the assets and operations of Shell Ethiopia Ltd while 119 million Br was owed in capital gains taxes, claims ERCA.
All this started when an informant working at Oil Libya tipped off the tax authority that the 99 million Br acquisition of shares of Shell Ethiopia, which has been distributing petroleum products in Ethiopia since 1948, was not the actual amount.
This led to a six month investigation by ERCA which took investigators all the way to Her Majesty’s Revenues and Customs (HMRC) in London. Oil Libya, a Mauritius-registered oil distributer, actually paid 323.4 billion Br for the acquisition, which investigators at the tax authority claim to have found out.
Oil Libya had contested the assessment of the investigators to the review committee, which is under ERCA, but was found to have been in the wrong in July, 2011. The company then appealed its case to the Prime Minister’s office, the Ministry of Foreign Affairs (MoFA) and the director general of ERCA, claiming that the amount asked would force it out of its operations in Ethiopia.
When this ploy failed, Abdusalah Yuneus, one of the three Libyan shareholders and London-based general manager of Libya Oil Ethiopia came to Addis Abeba that same month. However, his attempt to appeal to senior officials from tax assessment and enforcement departments of the authority, including the director general, was also thwarted, leaving the company only to resort to legal action.
The company was left with putting up 50pc of the amount. Further, it was asked to appeal its case to the appellate commission, which is under the Ministry of Justice (MoJ).
“The company was appealing to different government bodies which are not eligible to see tax-related issues to divert attention,” an official at the tax authority who was not authorized to comment said.
Having failed to pay the amount or appeal its case to the commission by the deadline of September 13, 2001, the tax authority blocked the bank account of Oil Liby at Wegagen Bank, Meskel Square branch, last week.
The tax authority has this mandate, which was given to it under the income tax law. It can affect seizure of property, if the authority finds that the collection of the tax due is in jeopardy or in a state of refusal, and to satisfy its claim by giving a 30-day notice, according to the proclamation. This is with the exception of employee’s remuneration or other properties liable for attachment.
The oil company has been claiming in different discussions held with officials at the tax authority that it did not have enough liquid cash, according to sources.
“However, it was found that it usually transfers its cash to the main office or changes it into assets,” the senior official said. “Therefore waiting for 30 days had put collection of the money owed in jeopardy, and that is why ERCA went after the bank account.”
Employing close to 200 staff members with 180 retail stations across the country, Oil Libya has been struggling to reclaim the dominant market position marked by its predecessor, which used to have 48pc of the market share.
It is now undergoing an expansion project, building an oil depot inside Bole international Airport, with the capacity to store 1.5 million litres. This has put the company in a position to supply 50pc of fuel used by Ethiopian Airlines (ET).
Collection of the money ERCA claims is owed would lead to 20pc of the 91 million Br recouped, of which the informants would end up with 18.2 million Br.