How businessman Moosa dodged tax

MASERU — When news broke last week that prominent businessman Osman Moosa and his son Shameen were facing 180 charges of dodging tax Moosa said the charges were not justified because he had not refused to pay his dues.

He said he was not a tax dodger and challenged the Lesotho Revenue Authority (LRA) to prove that he owes tax.

Moosa said as a business leader he was committed to paying his tax.

On Friday his lawyer called this paper to demand an apology for the headline, ‘Tax dodger nabbed’.

But a court indictment on Moosa, Shameen and their company Selkol (Pty) Ltd, which was seen by the Lesotho Times, paints a picture of deceit, misrepresentation, nondisclosure and a web of lies.

All these, the indictment says, were used by Moosa to evade tax between 2003 and 2007.

The indictment says between 1997 and October 2006 Selkol operated two sets of accounts which were allegedly designed to dodge tax.

One set of the accounts was on Ultisales (an accounting software programme) which was kept in a directory called POS. 

The POS ledger, according to the indictment, contained sales made by Selkol as part of its business in Lesotho.

It is from this ledger that the company derived gross profit and taxable income, says the indictment.

Sales captured in this ledger were shown in the company’s income tax returns to the LRA for assessment between 1997 and 2006.

LRA investigators however discovered that the company had a second set of accounts which were captured on a memory stick and the server.

These accounts were under a directory called NAOL, which the investigators say stood for loan ledger.

The loan ledger contained sales which were not captured in the POS ledger that Selkol had submitted to the LRA for tax payments and assessments between 1996 and 2006. 

“These sales were not disclosed in the income tax returns, sales tax and value added tax (VAT) returns of Accused 1 (Selkol) to the LRA for the period 1997 to 2006,” says the indictment.

During the investigations the LRA says its officers also found a receipt book at Moosa’s house showing further evidence that there had been a deliberate effort to dodge tax.

The receipt book showed Selkol’s sales for the period between November 2005 and April 2007.

The indictment says while the “undisclosed sales in the loan ledger were captured until August 2006, the receipt book showed further undisclosed sales by Accused 1 for the period September 2006 and 5 April 2007 in the amount of M2 257 398.88”.

The indictment adds that the undisclosed sales from the loan ledger and the receipt book amounted to M10 927 089.96.

The LRA says because these sales were not declared Selkol did not pay tax on them and thus deprived the state of the much needed tax revenue.  

The LRA claims the state is entitled to the statutory 10 percent tax on those undisclosed sales.

Selkol is also supposed to pay the 14 percent VAT tax on those sales, the revenue authority argues.

When a person buys a product or service from a business they are charged an additional 14 percent in the form of VAT.

The business is supposed to be remitted to the revenue authority.

The government then uses the money to pay salaries and fund infrastructural development programmes.

 In this case, according to the indictment, Selkol and the Moosas were charging VAT on clients but would pocket the money instead of remitting it to the tax authority.

Documents attached to the court papers show that between 2004 and 2007 Selkol did not declare VAT receipts worth M1 191 575.26, money enough to build a decent rural school.

In 2004 Selkol failed to declare M5 499 110.15 worth of sales tax and prejudiced the LRA M824 866.52 in sales tax.

The following year, according to the indictment, Selkol failed to declare sales worth M1 769 448.34 and it did not pay the M265 417.25 it was supposed to pay in taxes.

In 2006 sales worth M2 154 548.88 were not declared and M323 182 .17 was not paid in sales tax.

The company prejudiced the country of M228 860.17 when it failed to declare sales worth M1 525 734.49.    

All in all the company owes M1 642 326.27 in sales tax.

The indictment also alleges that Selkol, with the help of the Moosas, who are directors, manipulated the amount of stock purchased in order to pay less tax.

They allegedly did this by “adjusting the actual figures for the stock purchased to higher figures in the financial records of Accused 1 in order to reduce the amount of income tax payable”. 

The manipulation allegedly happened from 2005 to 2007 and the overstatement amounts to M5 208 853.02.

Moosa and his son were “knowingly involved in the non-disclosure”, the indictment says.

The LRA also wants Moosa, his son and their company punished for fraud for allegedly misrepresenting that the information they submitted in their tax returns was correct. 

The revenue authority says Moosa and his son “knowingly or with consent acted” “wrongly and with the intent to defraud the LRA falsely”.

The indictment continues to say Selkol’s sales, income received and taxable income it was supposed to pay, “were substantially more than that disclosed/declared in the respective returns of the said assessment period.”

“The information contained in the returns did not constitute a true and full disclosure of the information required to the disclosed/declared in the said returns.”

In so doing, the indictment adds, Selkol falsely claimed to have complied with the country’s tax laws.

“By virtue of the undisclosed/undeclared income the LRA was not in a position to properly consider and assess the true tax liability of Accused 1.”

“The LRA was deprived of the right opportunity to collect the correct taxes due to it by Accused 1 timeously or at all,” adds the indictment.

The indictment also alleges that Selkol, assisted by Moosa and his son, “deliberately” or “recklessly” failed to maintain proper records for the taxable supplies for the LRA to properly assess the company’s compliance to tax revenues.  

Selkol is a popular furniture making company and supplies major retail shops in the country. Selkol is a member of Moosa’s Group of Companies that includes Building World (Pty) Ltd, Moosa Holdings (Pty) Ltd, Moosa’a Bargain and City Moosa Cash & Carry.

When the Lesotho Times called Moosa yesterday afternoon he picked up his phone but the line got cut before he could answer questions.

Several attempts to call him later were not successful.

Moosa is the chairman of the Private Sector Competitiveness Forum, an organisation that advocates a better operating environment for investors in Lesotho.

Father and son have so far appeared in court twice to answer their charges.

Both have denied the charges.

They are currently out on a M15 000 bail and M100 000 surety each.

They are expected to appear before the High Court for a summary trial on a date yet to be finalised.

In an interview with the Lesotho Times last week, Moosa said he was waiting for the LRA to prove that Selkol owes money when the revenue authority rushed to court.

“I am fully behind LRA because I understand its mandate of collecting revenue and therefore I could not refuse to pay tax,” Moosa said.

“I’m not saying LRA is wrong but I just need verification that I owe them that much,” he said.

With revenue from the Southern African Customs Union (Sacu) dwindling Lesotho is trying to improve the tax administration by reining in tax dodgers.

Finance Minister Timothy Thahane recently warned that 2011 was likely to be a difficult year for Lesotho as Sacu revenues continued to decline.

Over the past few years 60 percent of Lesotho’s budget has come from Sacu.

But the global economic recession and reduced imports into Sacu have changed that.

A recent working paper by the International Monetary Fund (IMF) warned that smaller Sacu members like Lesotho and Swaziland might have to  increase taxes and improve tax administration to make up for the gap left by Sacu.

The paper also said the government might have to cut expenditure and increase service charges. Without Sacu, Lesotho has to rely on taxes for revenue.

But over the years the country has battled to rein in tax evaders.

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