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The
fraud of frauds in VAT Detectives said evidence found so far indicated that both the Inland Revenue senior staff and businessmen allegedly involved in the racket had carried out fraudulent transaction to the tune of about Rs. 3.5 billion but with further disclosures the sum involved might be around 10 billion rupees. The VAT system was introduced by the then UNP Government in the 2002 budget to replace the GST (Goods and Services Tax). Investigations show that senior staff at Inland Revenue was involved in this massive fraud from the time the VAT system came into operation. This week a former deputy tax commissioner Gnanasiri Zoysa Jayathillake who worked in the VAT section was arrested and his passport impounded but others in that section have not been questioned yet. Incidentally
Mr. Jayatilleke’s immediate supervisor A.A. Wijeyapala is
due to be appointed as the Commissioner-General of Inland Revenue
next week. In one instance a Colombo businessman S. Subramaniam is reported to have received Rs. 646 million as VAT refunds from the Inland Revenue Department by way of five separate cheques from even though his companies were not engaged in any trading. The names of the companies and the refunds they were paid is as follows: Lotus Apparels (Pvt.) Ltd. Rs. 98 million; Lotus (Pvt.) Ltd. Rs. 127 million; Upali Apparels (Pvt.) Ltd. Rs. 139 million and Universal (Pvt.) Ltd. Rs. 164 million while a personal cheque of Rs. 118 million was sent to Mr. Subramaniam's private residence in Colombo 7. The only other director of these companies was Mr. Subramaniam's wife, but up to yesterday, the CID had only impounded Mr. Subramaniam's passport but was yet to question him. However the CID said it had not confirmed whether Mr. Subramaniam had any knowledge about his named being used. The Sunday Times Insight also learnt that in another instance a company known as Multi-Sacks (Pvt.) Ltd. – registration No. N(PVS) 13315 and trading in Panadura – was granted concessions by Mr. Wijayapala for the payment of VAT amounting to Rs. 80 million -- a concession not usually given to VAT defaulters. The
payment was to be made on monthly instalments of Rs. 500,000 for
160 months (14 years) without interest or penalties being added.
Acting Tax Commissioner General A.A. Wijeypala told The Sunday Times that he could not recall have given any concessions to such a company as there were so many cases he had to handle. “We
usually don’t give VAT concessions unless it is a special
case”, he said. Apart from the missing cheques the CID had found even some important transaction files also gone missing and believe they must have been destroyed. The VAT scam was first discovered by the Auditor General's Department when it detected an unaccounted sum of Rs. 3.573 billion in the VAT refund account. According to detectives, Mr. Jayathillake had left Sri Lanka for New Zealand at the time the audit query was made. He is believed to have funded a Kalutara district MP for November’s Presidential election campaign and had left the country immediately after the election. He had then arrived again in the country on March 15 on a visit having earlier sent in his resignation from New Zealand. The Bribery Commission was also looking into certain documents filed in the VAT fraud detection at the Auditor General's Department. Auditor General S.C. Mayadunne said his Department was in the process of finalising the report on the fraud. The CID had recovered 20 identity cards, 19 of them forged which were used in fraudulently obtaining VAT refunds. It had been found that names of several bogus companies had been used in obtaining VAT refunds.The CID said Treasury officials who approved the refund of such large sums were also due to be questioned. A
Sunday Times investigation found the VAT fraud had been committed
by a group of influential people some of whom were connected to
the Treasury, the Finance Ministry, Inland Revenue Department, politicians
and businessmen. The
former Deputy Commissioner Z. Jayathillake as he is popularly known
in the department was the official in charge of authorising such
refunds. Mr. Jayathilake had served the Inland Revenue Department for nearly 25 years and had earlier held other top government posts such as Industrial Development Board General manager and Southern Provincial Council Secretary. Since most of the cheques were drawn on Bank of Ceylon, the Inland Revenue Department sources question whether bank officials were also involved in this racket as they had not checked the identity of the payee who might have presented forged identity cards and documents to obtain the VAT refund money. The Sunday Times learns that the fraud had been first investigated by the CID as far back as 2003 but despite the magnitude of the fraud the CID had stopped probe saying the Bribery Commission was investigating the matter. Ultimately, neither party continued the investigations till the matter was highlighted in the Auditor General's report. As the probe by the Bribery Commissioner and the CID were not yielding any results, several Inland Revenue Department officers had urged President Chandrika Kumaratunga to bring in the Presidential Investigation Unit to investigate the corruption and misappropriation of the tax payers money. It
is learnt that at the time Mr. Jayathillake was attached to the
Inland Revenue Department, he had travelled frequently to Australia
and New Zealand and that he had even bought property in these two
countries. |
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