http://www.guyana-times.com/?p=18458
September 14,2016
Govt terminates Investment Agreement with BaiShanLin.
…company now to repay $1.5B in tax waivers
The Guyana Government has terminated the Investment Agreement with controversial Chinese logging company BaiShanLin Forest Development Inc, and the entity is now being asked to repay the fiscal concessions it had been granted for the importation of machinery, equipment and vehicles to the tune of $1.5 billion.
Commissioner General (ag) Ingrid Griffith
Guyana Times has seen a copy of the Guyana Revenue Authority (GRA) letter, which was inked by Commissioner General (ag) Ingrid Griffith and called on the company to make good on its payment within two weeks or face having its machinery, equipment and motor vehicles seized.
This publication has since been informed that it was the failure of BaiShanLin to make its payments, which saw members of the law enforcement and investigative division of GRA descending on the entity’s Coomacka Linden operations Sunday last.
According to the GRA missive addressed to Managing Director of BaiShanLin, Chu Hongbo, the Government’s premier revenue collection agency had launched an investigation to determine if the terms and conditions under which the tax exemptions were granted had been complied with.
BSL breach
BaiShanLin Managing Director Chu Hongbo
According to the Revenue Authority, BaiShanLin failed to undertake the activities of the project specified in the Investment Agreement with regard to the setting up of a modernised wood processing facility in Linden.
The tax collection body also found that BaiShanLin had also failed to create and sustain employment for 150 persons over three years.
“It should be noted that they also failed to employ citizens of Guyana with first preference being given to residents in the region where the project is located,” the GRA added.
It found too that the company also failed to procure and provide all the investment and other financing required by the undertaking, in the estimated sum of US$150 million over a three-year period from the time of signing of the Investment Agreement.
The GRA also investigated to ascertain if the activities of the project were undertaken in accordance with the business proposals that the Chinese logging company had issued to the Guyana Office for Investment (GO-Invest) prior to the Investment Agreement.
The GRA found that the company had breached the terms and conditions, under which tax exemptions were granted as outlined in the Investment Agreement.
According to the Revenue Authority, BaiShanLin failed to undertake the activities of the project specified in the Investment Agreement with regard to the setting up of a modernised wood processing facility in Linden.
Value added, not log exports
In its letter to BaiShanLin outlining the course of action to be taken, the GRA pointed out to the company that during an interview, the company’s accountant informed GRA investigators that the design of the wood processing facility was now being finalised in China and the company was in the process of seeking alternative sources of financing to continue with the project, which would now include value-added processing.
In the letter, Griffith reminded BaiShanLin’s Managing Director, “As you are aware, the concessions were granted on the basis that activities of your company would be value-added processing and not the cutting, felling and exporting of logs.”
Repay $1.5B
It was subsequently determined that BaiShanLin breached its covenant with Government in its Investment Agreement “for which the penalty is termination of the Agreement”.
As such, “the residual Customs duty and taxes are now due and payable on machinery, equipment and motor vehicles” in the amount of just over $1.5 billion ($1,584,047,052).
The company was also warned that failing to make good on its payments within the two-week timeframe would result in “the Law Enforcement and Investigation Division taking the necessary actions to seize the machinery, equipment and motor vehicles” in accordance with the Customs Act.
Ranks of the GRA’s enforcement division seized several pieces of equipment belonging to the embattled Chinese logging company when they descended on its operations on Sunday.
The move by GRA’s enforcement decision came just days after the Guyana Forestry Commission (GFC) terminated several local Joint Venture Agreements the company had in addition to revoking its State Forest Exploratory Permit.
Joint ventures
Based on documentation seen by this publication, on September 1, 2016, the GFC wrote to the five companies with whom BaiShanLin had entered into joint ventures, informing them that the arrangement had been terminated, since the Commission had not been informed ahead of time of a transfer of shares.
Each of the companies was told to remove any equipment it had on the more than 400,000 hectares of forest within 90 days.
The matter has since engaged the attention of the Chinese Embassy in Georgetown, since it was approached for assistance by BaiShanLin.
According to letters issued to Haimorakabra Logging Co Inc, Kwebanna Wood Products Inc, Sherwood Forests Inc, Wood Association Industries Company and Puruni Woods, they had violated provisions in the Forestry Act when they failed to inform the Commission of a transfer of shares, hence the decision to terminate the arrangement.
GFC owed
In making the announcement of repossession, the Commission said, “The decision came after the company failed to deliver on agreed actions to introduce investors to the Commission and having been given time to prove that it had an acceptable plan to clear an approximately GY$80 million debt.”
BaiShanLin was incorporated locally in September 2006 under the Guyana Companies Act 1991 with the main objective of timber harvesting and establishing downstream wood processing operations in Linden.
To date, however, the company has failed to fulfil many of its commitments to the Government of Guyana, reneging on the obligations it made, which were accepted in good faith, according to the GFC.
