PKFZ

Tuesday August 11, 2009 The Star PKFZ panel: Possible fraud in developer's claims amounting to hundreds of millions of ringgit By LEE YUK PENG PKFZ: Possible fraud, police report to be lodged PUTRAJAYA: Hundreds of millions of ringgit in claims by Kuala Dimensi Sdn Bhd - the main developer of Port Klang Free Zone (PKFZ) - have been found to be either over-charged, unsubstantiated or even possibly fraudulent. This was the findings of a special task force that was set up to investigate the legal and financial aspects of the project. Red hot report: Transport Minister Datuk Seri Ong Tee Keat giving a press conference on the Port Klang Free Zone probe in Putrajaya yesterday. The special task force on the PKFZ project earlier handed copies of its 370- page report, with 2,500 appendixes, to Ong and Port Klang Authority chairman Datuk Lee Hwa Beng (left). On the right is ministry secretary-general Datuk Zakari Bahari. — GLENN GUAN / The Star The eventual amount in dispute could run up to as much as RM1bil. The Port Klang Authority (PKA) board of directors, at its meeting yesterday, decided to commence legal action against Kuala Dimensi and the other parties involved. They also directed PKA chairman Datuk Lee Hwa Beng to lodge a police report today over the matter. The allegations against Kuala Dimensi were contained in a statement issued by Lee after the board meeting. However, it was learnt that what was revealed yesterday was only the “tip of the iceberg and many more revelations of wrong doings are expected in the days ahead”. “Our lawyers will henceforth deal with Kuala Dimensi chief executive officer Datuk Seri Tiong King Sing and its deputy Datuk Faisal Abdullah. “Since there may be instances of fraudulent claims and taxpayers’ money are involved, we will make a police report at the Klang police station so that appropriate investigation is taken,” said Lee in the statement. Copies of the 370-page report, with 2,500 appendices, by the task force were also handed over to Transport Minister Datuk Seri Ong Tee Keat by its head Vinayak Pradhan of legal firm Skrine and Co at the ministry here. Other members of the panel are Skrine partner Lim Chee Wee, PricewaterhouseCoopers Advisory Services (PwCAS) managing director Chin Kwai Fatt and PwCAS senior executive director Lim San Peen. Among others, the task force, which was set up on June 10 to look into the legal and financial aspects of PKA and PKFZ, had found that Kuala Dimensi had: >POSSIBLY made fraudulent claims on electrical infrastructure worth RM55.8mil, which had yet to be carried out on the site, and 33kv supply works and civil infrastructure works worth RM83mil as TNB had rejected the proposal for Kuala Dimensi to undertake the work. >NOT provided any document to support its claim of at least RM231mil as preliminaries under the development agreements while at the same time, it had made claims for items, which they were not contractually entitled to, such as claim for the procurement of a performance bond and payment for insurance premiums totalling RM5mil. >NOT justified its claim for variation works of RM62mil under Additional Development Works and New Additional Development Works agreements. >APPEARED to have made an “over claim” for hotel works, for which Kuala Dimensi had claimed RM69.6mil compared to the quantity surveyor’s valuation of RM44.7mil. >NOT produced any invoice or payment voucher for the RM61mil which the company claimed was professional fees and expenses incurred. >CLAIMED RM254.9mil as extra work done even though the purported revised works fell within the scope of the original works envisaged in the main development agreement. Lee said while PKA members still required more time to consider the lengthy report in detail, several decisions had been made in the meantime. “The board had decided that the quantity surveyor continue to re-measure the value of works performed by Kuala Dimensi in order to establish the real sum owing to the main developer. “Presently, they have identified a difference of at least RM93mil between the claims made by Kuala Dimensi and the measurements made by the quantity surveyor. “We believe that there will be further differences in the re-measurement exercise.” ============================== Kita tengok siapa yang akan jadi kambing hitam untuk kes ini. Ramai yang kenyang baham duit rakyat bernilai berjuta-juta ringgit nie dan mereka akan cari seseorang untuk dipersalahkan. Wahai rakyat, wang ini bukan masuk dalam perut sorang saja tapi semua orang dah terima habuan dan kenyang macam ular sawa. Tak mungkin hanya seorang lelaki saja mampu menipu wang negara hampir berbillion jumlahnya tanpa sokongan pihak lain yang lebih berkuasa dan yang paling malang adalah para nelayan yang teraniaya dalam kes ini. Moga Allah melaknati mereka semua dunia dan akhirat dan ya Allah tunjukkan balasan Mu terhadap mereka ini, moga beri pengajaran kepada pemimpin yang lain yang bercita-cita untuk melahap wang rakyat.

Tax avoidance or tax evasion

Tuesday August 4, 2009 We all avoid tax at one time or other; but is it wrong? Tax Insights - By Kang Beng Hoe Unacceptable avoidance may be said to be not unlike obscenity - difficult to define but one knows it when one sees it THE practice of tax avoidance is not a recent phenomenon. Indeed it goes further back than 1798, the year William Pitt introduced income tax in England. It probably began as much as 6,000 years ago when the local king in a small region of Mesopotamia eventually imposed fines on those who swam across the river to avoid the dues on the local ferry. Today the spectre of daily Klang Valley vehicular traffic meandering through subsidiary roads to avoid highway tolls is a manifestation of tax avoidance in our lives. It is generally understood that tax avoidance is legal whereas tax evasion is not. However, according to the tax historian Basil Sabine, the term “legal avoidance” was not coined until 1906; meaning a skilful exploitation of a loophole following a close reading of the tax law. It may be said that the modern era of tax avoidance owes its wide practice and respectability to Lord Tomlin who in the celebrated Duke of Westminster case in Britain said: “Every man is entitled, if he can, to order his affairs so that the tax attaching under the appropriate Acts is less than otherwise it should be.” This was in 1936 but, since then, much has changed and the view of tax avoidance has now taken on an ethical dimension. In other words it is not enough to ask the question “Is it legal?” but the question “Is it right?” is considered relevant. This has come about because under the Duke of Westminster definition: “Ordering one’s affairs so that the tax attaching thereto is less than it otherwise would be” has given rise to the widest possible connotations. It has fawned the ultra-complex and ultra-sophisticated arrangements put in place by multinational organisations across different countries with differing tax treatments of the same transaction. It is a small wonder then that tax authorities everywhere have tended to distinguish tax avoidance between those which are “acceptable” from those which are “unacceptable”. Taxpayer groups such as anti-globalisers, Greens and many others have assailed tax avoidance in general as “immoral” or “unethical”. The debate surrounding whether tax avoidance has become an ethical issue has even divided finance directors of companies in Britain. They responded to a magazine survey with 57% saying that tax avoidance did have ethical implications with 43% saying that ethics and avoidance were not linked. This survey followed a KPMG report which said that the public profile of tax had become “more conspicuous” and had “acquired moral, ethical and social dimensions” for the first time. The Chartered Institute of Taxation in Britain has gone on record to say that the term “avoidance” has come to have “overtones of immorality or going too far”. The law does not provide a sound basis for distinguishing cases of acceptable tax planning from unacceptable tax avoidance. This has merely made it more difficult to arrive at a position where ethical considerations become relevant. The courts in a number of countries have spent a lot of time deciding what is acceptable and unacceptable tax avoidance. Thus, unacceptable avoidance may be said to be not unlike obscenity – difficult to define but one knows it when one sees it. The recent scandal involving British parliamentarians and their expense claims brings into sharp focus the ugly face of unacceptable tax avoidance. Press reports highlighted the case of a Treasury minister who had two houses, but told the tax authorities that her Burnley home was her “principal residence” for a single month in 2007 prior to selling it at a profit. This had the effect of saving her substantial tax on the profit. Public sentiment was not sympathetic over her action and a typical comment was: “... this transaction may have been legal, but it was also obviously unacceptable. Tax avoidance is clearly unacceptable now: People have to be tax compliant. This was a blatant case of tax avoidance: Clearly no one swaps their place of main residence for a month, as she claimed to have done, however legal that claim might be.” This case clearly shows that while one can relatively easily decide whether something is legal or not, what is ethical is a much more complex question requiring consideration of a host of ancillary factors. Despite the trend towards an ethical approach on tax avoidance, its practice is far from dead. One reason is that ethics and morals can be subjective and is best summed up by one commentator: “I see this as a moral issue and have no desire to seek to impose my own moral standard on others.” • Kang Beng Hoe is an executive director of TAXAND MALAYSIA Sdn Bhd, a member firm of the TAXAND Network of independent tax firms worldwide. The views expressed do not necessarily represent those of the firm. Readers should seek specific professional advice before acting on the views. Kang can be contacted at kbh@taxand.com.my