Eco Star Trade and Industry Plc and three of its shareholders were sued last week for tax evasion and fraud of close to 80 million Br related with the company's trade activities in the two years starting from 2007, by prosecutors of the Ethiopian Revenues and Customs Authority (ERCA).
Prosecutors instituted the claim against the company as well as Mohammed Nur Haji Abdulahi, general manager; Nigussie Hunegnaw Eshetu, deputy general manager; and Mohammed Haji Abdulahi Sheik, manager of Overseas Accounts for the company; on Thursday, January 13, 2011.
The company was sued for allegedly not paying income tax and VAT amounting to 32.6 million Br for transactions made during the specified years, and falsifying financial statements to hide its income. It was further charged with evading VAT of around 892,000 Br and also falsifying documents to that effect. In addition to interest and penalties, the company owed a little over 80 million Br, prosecutors claimed.
Eco Star Trade and Industry, established in 2007 with a capital of one million Birr, was one of the seven companies that were granted permission by the Ministry of Finance and Economic Development (MoFED) to import cement using franco valuta, in 2007/08. It was exempted from paying VAT, duty, and income tax on cement it imported into the country.
However, the company bought cement from Red Fox International Investment Plc, a local cement factory in Adama Town, Oromia Regional State, while it claimed it never made local purchases, according to an audit report compiled by the ERCA. The company had also under invoiced the cement it imported into the country, prosecutors further alleged.
The company was also charged with money laundering.
It attempted to loan the fourth defendant, a Kenyan citizen, 30 million Br it had made from transactions, which prosecutors claimed was illegal, and have him pay it back, the charge claimed.
All the individuals were criminally charged for participating in the commissioning of the tax evasion and fraud intentionally and with full knowledge of what they were doing. The general manager was charged in absentia as his whereabouts are unknown. The remaining defendants had been in custody for a month before being charged, on Thursday.
Aside from the audit report, the articles of association of the company and a signed contract for the 30 million Br loan were included in the close to 50 pages of documents entered as evidence.
The defendants requested bail rights, which the prosecutors opposed by claiming to have a long list of reasons why it should not be granted. However, the arguments were not heard as an interpreter for the fourth defendant, who claimed not to be able to speak Amharic, was not available.
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