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Sarawak's way of evading tax and shareholding rules
Published:  Mar 19, 2013 10:23 AM
Updated: Mar 20, 2013 2:47 AM

VIDEO l 16.24 min

EXCLUSIVE Not only was the abuse of logging licences by some of Sarawak Chief Minister Abdul Taib Mahmud's family members and business associates captured on video , their illegal modus operandi to evade tax and circumvent the government's requirement of 51 percent local shareholding ownership was also exposed.

NONE An undercover investigation conducted by Global Witness, a London-based NGO that investigates and campaigns against environmental and human rights abuses, last year clandestinely recorded video footage showing two Taib's cousins and their lawyer explaining the mechanism.

Posing as a "foreign investor" looking to buy land for oil palm plantations, the undercover investigator sent by Global Witness went to a state government body charged with handling foreign investment and was immediately directed to certain members of Taib's family.

These family members were looking to sell their shell company which was issued with licences by Sarawak's Ministry of Resource Planning and Environment, which is headed by Taib, to log and clear land for plantations.

NONE One of the companies is Ample Agro Sdn Bhd, whose six shareholders are Taib's first cousins and all daughters of Sarawak's former chief minister, Abdul Rahman Ya'akub ( right ).

They include Tanjung Manis MP Norah Abdul Rahman, and Khadijah, who is also sister-in-law to Prime Minister Najib Abdul Razak.

The six sisters controlled the RM2 company through a holding company called Sateras Holdings Sdn Bhd.

The deal was proposed to the Global Witness investigator by Norlia Abdul Rahman and her sister Fatimah, both directors of Ample Agro.

Sisters suggest two sets of agreements

During their meetings with the investigator, Norlia and Fatimah suggest that the proposed US$16.6 million (RM52 million) sale of their land lease could be done illegally to evade paying millions in Real Property Gains Tax (RPGT).

They suggest that two sets of agreements be drawn up, with one setting out a nominal sum that would be registered with authorities in Malaysia, while the principal amount would be paid through an undisclosed agreement in Singapore to evade paying any RPGT.

NONE "Well, there are different ways of doing it, some people do it this way. Certain portions are paid here and the balance of it can be paid in Singapore. You know, outside, why they do that is to save on the RPGT," Norlia explains in the video recording.

"We will have to do two sets of agreements... both agreements are done here but the other one specifies the full amount where the details are spelled out, whilst the one here is only just for the portion that's here."

Asked whether the arrangement would breach any law, Norlia firmly replies, "No, it's been done... It's been done before."

Such an arrangement is in fact illegal under the Real Property Gains Tax Act 1976 and punishable with a prison sentence.

However, none of the Ample Agro shareholders, when contacted, responded to the claims made by Global Witness.

During the investigation, the investigator was also referred to lawyers acting on behalf of Taib's family interests, who divulged details on the corrupt system used to extract wealth from Sarawak.

'Singapore, the new Switzerland'

One of these lawyers is Alvin Chong Chee Vun of Alvin Chong & Partners, Kuching, who has represented the Sarawak government, government-linked companies and prominent public listed companies with close links to Taib's family.

Engaged by Norlia for the proposed sale of the land by Ample Agro to the "foreign investor", Chong explains in the video that their suggestion is to execute the deal in Singapore.

NONE "The Singapore has a China Wall... They will not tell them, the Malaysian government, nothing... They [Malaysian government] ask them and they've been turned down...

"Sorry, it's none of your business. They are the new Switzerland. Jurisdiction by choice for people like us. We operate Singapore accounts too, both personal and corporate entities," Chong says in the video.

In addition, Chong advises another mechanism to allow foreign investors to circumvent existing company laws, which requires the majority of the shares to be held by a Malaysian citizen.

This mechanism involves finding Malaysian nominee shareholders, then arranging a "loan" between the foreign investors and the nominees for the "purchase of shares" in the local company, and in turn using these shares as collateral against the loan.

NONE This in effect renders the local shareholders as nominees who remain "indebted" to the foreign investors and are thus compliant.

Although the law stipulates that local shareholders must not hold shares on trust, Chong assures the investigator that the agreement underpinning the mechanism would be "locked up offshore", meaning that the agreement would not be disclosed to the Malaysian authorities.

The proposed offshore jurisdiction for Chong's mechanism was Singapore, which he said would not comply with requests from Malaysian authorities for information about such agreements.

'Nominees' are ignorant villagers

When asked where the potential nominees could be found, Chong stated that he targets villagers from remote communities who are ignorant to the true nature of legally binding contracts, and who are unable to seek legal redress.

"From the lowest rank we can find in a remote area. They will not be distracted by clever advisers.

NONE "What I normally do... so I'll tell you some trade secrets, as such... We find some guys who are villagers, sign them for all the stuff, you can't even reach them.

"They wouldn't know how to find a lawyer, would they? (Laughs) This is cheap, it's really cheap.

"Can you imagine the villager comes to town and you say 'I'm giving you 10,000 bucks'. My God, he is going back to the village, you know, he'll be the one-eyed man who is king in the land of the blind, you know," Chong elaborates.

Chong assures the investigator that the chosen nominees "won't surface" and "won't hold a shred of paper", and that he had used this mechanism "many a times".

In response to Global Witness' questions later, Chong's firm replies, "We categorically deny our Mr Chong acted as legal spokesperson for the alleged party.

"...We categorically deny each and every unfounded allegation made... We deny any discussions to allegedly evade tax and if there were any purported discussions, these were strictly hypothetical," the firm's statement says.

Global Witness is calling on Malaysia's federal authorities to set up a royal commission of inquiry to investigate the extent of corruption among Sarawak's leaders and state government institutions.

The proposed RCI should explore institutional reforms to improve systems of transparency and accountability, and to ensure prosecutions swiftly follow against those found to have been engaged in corruption.

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