The Guyana Revenue Authority (GRA) wrote Chinese logging company Baishanlin in February this year seeking $1.58b for breach of the terms under which tax exemptions were granted.
According to the letter seen by Stabroek News, the GRA said that Baishanlin did not undertake the aspects of the project specified in the investment agreement signed with the Government of Guyana i.e. upgrading and building a modern wood processing facility at Conception, Linden.
It was also argued by the GRA that Baishanlin failed to create and sustain employment for 150 persons over three years and that the company failed to procure and provide all of the investment and other financing needed for the undertaking in the sum of US$130m over a three-year period from the date of the signing of the investment agreement.
The GRA letter by then acting Commissioner-General Ingrid Griffith to Chu Hongbo, Managing Director of Baishanlin said that the company’s accountant, Nigel Persaud had told GRA investigators that the design of the wood processing facility was now being finalized in China and the company was in the process of seeking alternative sources of financing to continue the project which would now include value adding processing. Griffith’s reply to this was that the ”…concessions were granted on the basis that activities of your company would be value added processing and not the cutting, felling and exporting of logs”.
As a result, Griffith’s letter advised that Baishanlin was in breach of Covenant 5 (1) b (i) of the investment agreement with the government for which the penalty is termination of the agreement. The GRA therefore said that the residual customs duty and taxes were now due and payable on the machinery, equipment and motor vehicles to the tune of $1.58b in accordance with Section 36 of the Customs Act, Chapter 82:01.
Fourteen days was fixed as the period for payment to be made failing which Griffith warned that the Law Enforcement and Investigation Division of the GRA would take the necessary action to seize the items.
It was after this letter, that Minister of State, Joseph Harmon made a controversial intervention with the GRA to stay the seizure of the Baishanlin items. After an uproar over his intervention, the GRA proceeded in April this year to begin seizing Baishanlin’s assets including several luxury vehicles from its Providence compound. This exercise continued over the weekend.
Meanwhile, Baishanlin is claiming that the GRA has not explained how it came up with the $1.58b figure.
“We already invested US$100M here and GRA charge that we break investor agreement and they [want] us [to] pay back the duty for the machines. For us, we don’t understand their judgment of $1.58B to pay back this duty,” Baishanlin Chief Executive Officer Chu Hongbo told Stabroek News yesterday.
“Our investment agreement signed with the Guyana government is valid for three years from the year 2015. GRA states we break the agreement. We have no idea how they confirm that we break the agreement. I don’t know how they calculated… All of the foreign investors here in Guyana enjoy duty free priority for their project or investment in Guyana. We did not have a different mould for our investment, it was the same,” he added.
According to an audit conducted by former Auditor General Anand Goolsarran, during 2012 to 2015, the PPP/C government granted Baishanlin concessions amounting to $1.8 billion despite its failure to fulfill obligations under its investment agreements.
Goolsarran had recommended that the Government of Guyana consider terminating the investment agreements with the company and recover the value of the fiscal concessions granted to it.
Meanwhile, the company is also seeking an inventory of the items seized by the GRA during operations at its Providence and Coomacka locations last Friday and Sunday, respectively. Among the items removed were vehicles, machinery and equipment as well as items acquired separately.
Company officials have also alleged that the personal effects of staff were stolen during the operation.
They also allege that their workers were shoved by a GRA officer and had their right to freedom of movement taken away when they were placed in a line and told not to move. They claimed the GRA officer was armed with a gun.
“About 25 men with big guns, about five trucks and their own machine, they came and said they are the GRA. My worker, he got scared and ran to call me, saying that he thinks we are being robbed but the men… shouting is GRA and he wants me to call the police to find out if it is true,” an employee, Eddie Wang, had told Stabroek News on Monday.
“They took away his phone and up to today have not given it back. They went into his room and pulled out a shotgun he has, without asking for the licence and started saying he has illegal firearm and ammunition. But that is not it. While he was outside they stole his laptop, some other things and imagine two packs of Pall Mall cigarettes and his cage with two parrots, then doubting that no one took anything,” he added.
Some of the articles were returned when one of the Baishanlin staffers got a peek of an item in the vehicle of a subcontracted GRA unit and insisted on it being searched.
Wang said that as he was trying to get an explanation from a GRA official he knows about the procedures, since he was shoved along with other staff by a GRA employee and told to shut up and stay put at an area identified.
“Imagine they said they are lawful and they do these things to us and you must hear how they shouted at us,” Wang noted.
Baishanlin has made a formal report to China’s Ambassador to Guyana Zhang Limin on allegations of theft by GRA personnel during the raid, the alleged shoving of the workers and the alleged threats made to workers.
The local tax agency remains mum on the operations.
“The Commissioner-General says, ‘No Comment,’” the secretary to GRA’s Head Godfrey Statia told Stabroek News yesterday when contacted.
Chairman of the agency Rawle Lucas had earlier told this newspaper to contact Statia for a comment.
GRA has also not explained to the company what are its procedures for seizures neither has it given the company an inventory of the items it removed.
The legal counsel for Baishanlin says a meeting with relevant authorities of the GRA to discuss the raid and the way forward has been proposed.
Chu has appealed to government and the people of Guyana to show patience and give the Chinese logging company at least three years to deliver on its commitments to value-added output and job creation.
“We need three more years. Say, up to 2019. We would appreciate if the Guyanese people and government show patience with us. They will see the returns on their investment,” he told this newspaper on Monday.
“Our financing in China depends on the investment conditions here in Guyana and if they feel that they cannot be guaranteed those conditions, then we cannot move forward…the way the GRA acted yesterday, by just seizing our machinery and even personal property of staff and even the car of a friend who was visiting, that is not a good sign for our investors,” he added.