Wilmar - To catch a falling knife?

Wilmar Int'l denies tax fraud accusations

By JOYCE HOOI

(SINGAPORE) Wilmar International Ltd has denied allegations that its Indonesian subsidiaries made value added tax (VAT) restitution claims that were 'questionable and fictitious', in a statement released on the Singapore Exchange (SGX) website last night.

The statement was made in response to media reports claiming that the subsidiaries were under investigation for conspiring with Indonesian officials to obtain tax refunds of up to 3.6 trillion rupiah (S$544 million) through alleged fictional transactions.

'The company is fully confident that its subsidiaries are, and have at all times been, in full compliance with all relevant Indonesian value added tax laws,' Wilmar stated in its statement.

'The company categorically denies the allegations that the value added tax restitution claims are questionable and fictitious, and further categorically denies any allegation of collusion with tax officials referred to in those reports, which the company hereby states are completely untrue and unsubstantiated.'

The Jakarta Post had quoted Golkar Party committee member Bambang Soesatyo as saying that Wilmar had fabricated financial reports and arranged bogus transfer pricing to receive the refunds.

He also claimed that Wilmar received tax reimbursements worth 800 billion rupiah in 2007 and 900 billion rupiah in 2008, and stood to receive an 1.9 trillion rupiah refund in 2009.

In its statement yesterday, Wilmar refuted claims that its subsidiaries had received more than their legal share of tax refunds.

'These subsidiaries collectively exported more than US$3 billion worth of palm oil in each of the last three financial years, thereby entitling these subsidiaries to claim the 10 per cent value added tax paid on the cost of these sales for each of those years,' Wilmar stated.

'These subsidiaries have received restitution . . . which correspond directly with the actual quantum of cost of export sales, consistent with the permissible amounts claimable under Indonesian value added tax laws.'

In a research note by UBS analyst Andreas Bokkenheuser that Reuters quoted, it was noted that if the claims were substantiated, there would be material impact on Wilmar's earnings.

'The total restitutions of US$385 million for 2007-2009 accounts for 21 per cent of our full-year net profit estimate. Under Indonesian tax law, the Tax Directorate can impose a penalty of up to four times the outstanding amount,' he said.