The Liberia Revenue Authority (LRA) has filed an Action of Judicial Review at the Tax Court on grounds that the judgment of the Board of Tax Appeal (BOTA), which allegedly cancelled US$2,551,489.26 out of the total of US$2,568,161.77 (a difference of US$16,672.51), as tax fraud against the West Africa Diamonds Incorporated (WADI) was unfair.
The LRA said in July 2016, it selected WADI, among several taxpayers, for tax audit and that the financial records of WADI were audited from January 1, 2011 to December 31, 2015.
The audit, according to LRA, discovered that WADI had unpaid taxes for that period, amounting to US$2,568,161.77.
Out of that amount, the LRA claimed that US$1,655,452.27 represented tax liability on rough diamonds shipped and sold out of Liberia.
The audit also discovered that US$3,656.83 as unpaid withholding tax on wages and salaries, US$1,673.80 as unpaid withholding tax on rental and lease payment to its resident lesser, and US$486,460.58 representing accrued interest on unpaid taxes.
WADI, the audit claimed, as a result of default, neglect and/or refusal, caused the LRA to impose penalties for late filing and failure to file in the amount of US$420,918.37.
LRA’s audit also revealed that WADI purchased diamonds valued at US$27,950,312 and sold same to another company — West Africa Diamond Limited (WADL), in Israel.
LRA further said the gross income of the US$27,950,312 of WDAL was discovered from shipment documents, including ticket bills, of which they audited as part of WADI’s tax obligation before resulting to the US$2,568,161.77 as unpaid WADI’s tax due the government.
LRA noted that from their records, it established that resources used to purchase the diamond were reported as funds belonging to WADI, and not WADL.
“Since WADL is WADI’s customer, in respect to the sale of diamonds, the transaction between the two parties (WADI and WADL) are legitimate and should be taxed according to the Revenue Code, which BOTA ignored in its analysis of related parties’ dealings,” LRA noted.
“Therefore,” LRA’s lawsuit said, ”WADI’s failure to have withheld and remitted taxes due the government in consequences of WADL’s tax obligation makes WADI liable, and the ruling of BOTA should be reversed and WADI be forced to pay US$2,568,161.77 as unpaid taxes due the government.”
The LRA said the registration documents of WADI revealed that the company was initially owned by Maximov Gabi, a 50 percent shareholder, and Rahamim Polater, who also holds 50 percent share, both of whom are Israeli nationals.
Subsequently, the document alleged that one Lassana Kamikai acquired 20 percent share in WADI thus leaving the original owners (Gabi and Polater) with 40 percent interest each.
During the audit period, January 1, 2011 up to December 31, 2015, LRA noted that WADI only recognized US$10,089 out of the US$27,950,312 worth of diamonds shipped to Israel.
As a result, LRA claimed that US$27,440,223 of WADI’s tax obligation was left undecided.
However, according to LRA, BOTA ignored those evidence and sought to commit a reversible error by canceling US$2,551,489.26 out of the total of US$2,568,161.77 amounting to a difference of US$16,672.51 as WADI’s tax obligation allegedly due the government.
In response, WADI’s legal team, the Jones and Jones Law Firm, did not deny the LRA’s allegation, but has asked the court to dismiss the entire lawsuit, on grounds that the action was filed contrary to the law and is inconsistent with the statute controlling the perfection of appeal, in and from an administrative hearing.
“Therefore, the entire appeal should be dismissed and denied,” WADI’s lawyers said in their response to the lawsuit.
After BOTA’s ruling on October 31, 2017, the LRA had 30 days by law to file its appeal for Judicial Review, which they did within 45 days, about 15 days after the ruling, something which is outside of the statutory period of 30 days.