24 July 2012

Liberia: U.S.$8 Million Tax Hunts Krystal Hotel

A Finance Ministry's audit of the Krystal Ocean View Hotel in Mamba Point, Monrovia for the period 2007 to 2010 has revealed a total liability of US$1,760,852.47 to the Government of Liberia.

Legal documents available to this paper indicate that interests accrued and unpaid along with penalties for the four fiscal years (A.D. 2007, 2008, 2009 and 2010) consistent with Chapters 51 and 52 of the Revenue Code of Liberia Act of 2000 amounted to US$6, 332,208.76.

The documents totaled the tax liability, interest accrued and penalties unpaid at US$8,073,061.23 as per the ministry's comprehensive audit report of June 22, 2011.

The discovery was made after the Liberian Government sued the Krystal Hotel at the Tax Court for failure to properly file and pay 7 percent GST (Goods and Services Tax), 2 percent Presumptive Tax and withholding Taxes to government.

In the action filed by the state, the defendant (Krystal Hotel) was accused of owing US$514,912.63 for the fiscal periods 2007, 2008, 2009 and 2010, respectively.

Prosecutors said as a result of the huge tax liabilities on the hotel, the Director for Enforcement and the Principal Director of the Large Tax Division at the Finance Ministry's Bureau of Internal Revenue wrote a total of six letters to the hotel's management, demanding payments.

The prosecution however noted that the Krystal Hotel deliberately and intentionally failed to meet up with its obligation, but cleverly paid a total of US$12,604.06 and LD$20,400.00 for various tax periods to the Medium Tax Division without filing an Income Tax Return to the Large Tax Division as required.

The hotel was said to have requested for an audit on grounds that it did not owe the amount spelt out in the writ by the prosecution (US$514,912.91).

However, as a result of the new discovery made during the Finance Ministry audit, the prosecution filed an amended complaint dated November 24, 2011, requesting the court to hold the defendants liable for the amount of US$8,073,061.23 instead of the US$514,912.91 spelt out in the initial writ filed against the defendants.

On the other hand, the defendants filed a response dated December 6, 2011 and a motion to dismiss plaintiff's amended motion on grounds that the prosecution had previously amended in the same cause of action and cannot therefore benefit a second amendment.

The defendants argued, "For to do so will be in violation of chapter 9, section 9.10, Para (a), (b), (c) which clearly states that amendment to a pleading can be done once by a party and no more."

The defendants further argued that the prosecution had agreed that indeed, it has exhausted its rights of amendment by virtues of previous amendments of May 21, 2010.

The defense alleged that on January 24, 2012, Tax Court Judge Eva Mappy Morgan refused prosecution's plea to augment the amount from US$514,912.91 to US$8,073,061.23 having entertained arguments from both parties.

She allegedly ruled on the motions in favor of the defendants for the case to be tried on the amount of US$514,912.91 as contained in the prosecution's first amended complaint.

But the defense claimed that Judge Morgan inadvertently substituted some minutes of a different content to the minutes of January 24, 2012, which ruled the case on the US$514,912.91 and disallowed the purported audit report of the Ministry of Finance, which accumulated the money to US$8 million.

Judge Morgan is expected to make ruling on the Bill of Information filed by the Mamba Point Krystal Hotel upon assignment.

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