Two companies that provided $74 million worth of services to the Guyana Gold Board (GGB) in 2014 and 2015 have been accused of VAT fraud and the GGB has been urged to refer the matter to the Guyana Revenue Authority for action.
A forensic audit into the GGB highlighted the case of Safewatch Inc and New Technologies Enterprises. “Our investigation indicates that certainly in the case of Safewatch Inc there is evidence of VAT fraud as Safewatch Inc. is not registered for VAT and cannot therefore charge VAT,” the report by accounting firm Ram and McRae says.
It said that in New Technologies Enterprises’ case while no invoices were seen, according to an extract of its contract with the GGB “Value Added Tax shall be imposed on the goods in Guyana.” The report pointed out that New Technologies Enterprises is not registered for VAT. The GGB paid the two companies $35.5 million and $38.6 million respectively with VAT payments to Safewatch Inc amounting to $6.4 million.
“We recommend that the transactions involving Safewatch Inc. and (New Technologies Enterprises) be referred to the Guyana Revenue Authority with a view to recovering such revenue improperly charged and appropriated and consideration be given to criminal proceedings taken as appropriate,” the report said. It also recommended that the practice of making payments based on pro forma invoices be discontinued immediately.
New Technologies Enterprises benefitted from two contracts to supply software to the GGB. The contracts were valued at $25.9 million and $18 million. The goods and/or services supplied by the two contracts are not VAT exempt and both contracts exceed the threshold for VAT registration, the report noted.
The report said that it is unclear whether VAT was actually charged and pointed out that New Techno-logies Enterprises is not registered for VAT and is therefore in breach of the legislation for either collecting VAT without being registered or failing to register and collect VAT. The report also said that the contract appears to be ultra vires both the General Manager of the Gold Board as well as the Gold Board itself.
“We therefore recommend that the transactions be referred to the Guyana Revenue Authority and the police for full investigations into this company,” the report said.
In relation to Safewatch Inc, payments to the company in 2014 and 2015 amounted to $35.5 million and $10.8 million respectively. Payments included monthly expenses for service contracts, purchasing and installing a server, security cameras and telephone equipment. The report said of 12 payments made to Safewatch Inc. during 2014, three of these amounting to $16 million were made on quotations.
The report said that there was no evidence of the Board authorising or ratifying the contract with Safewatch for servicing of the phone system at a cost of $180,000 plus VAT per month, which the report said was unnecessary. “On our advice, this contract has now been cancelled. We believe that steps should be taken to recover the amount of $2,436,000 paid for this fraudulent service,” the report said.
Further, it said that VAT was included on the total invoice value of all invoices and quotations submitted by Safewatch Inc, including that for the supply of computer items which are zero rated for VAT purposes. It pointed out that enquiries confirmed that Safewatch Inc is not registered for VAT in Guyana and cannot charge VAT on any goods/services provided, regardless whether goods or services would otherwise be subject to VAT. The amounts charged as VAT by Safewatch to the Gold Board in 2014 and 2015 were $4.9 million $1.4 million respectively.
“It is apparent that these transactions contained elements of VAT fraud for which the Value Added Tax Act imposes serious penalties. We therefore recommend that the transactions be referred to the Guyana Revenue Authority and the police for full investigations into this company,” the report said.
It urged management to ensure that adequate information is obtained from suppliers to establish tax status in Guyana including tax compliance certificates and TIN and VAT Certificates.
Several other issues were highlighted in relation to Safewatch Inc and the report recommended disciplinary action should be taken against former Secretary to the Gold Board Bobby Gossai Jr for alleged negligence in fulfilling his duty as Board Secretary. Gossai in a letter in today’s edition has said he always operated within the GGB framework and denied any wrongdoing.
“We recommend that all contracts with Safewatch be cancelled immediately and independent reviews should be conducted on the camera and server systems which are serviced by Safewatch. Also, all passwords to the systems should be changed with immediate effect,” the report further said.
The report pointed to discrepancies in the amounts stated in contracts for rental of properties and the actual amounts paid with the difference amounting to millions of dollars. The contracts were between the GGB and Shawn Hopkinson in Bartica and Alfro Alphonso in Charity.
Meantime, in relation to the requirement for a member of the Board to declare any conflict of interest, the report said there was no evidence from the minutes that Andron Alphonso, who is a partner in Adamantium Metals, a gold dealer, and a Board member during the period covered by the audit, disclosed his interest to the Board at the first meeting at which he was present. “However, the potential conflict of interest was noted by the Board in the meeting prior to Alphonso’s appearance on the Board and the Board was therefore aware of his interest,” the report said.
“Disclosure of interest is not adequate or satisfactory in these circumstances. The Government should ensure that no person is appointed to be Board who has any direct or indirect interest in the production, trading or export of gold,” the report said.
Earlier this year, Alphonso was re-appointed to the new Board.
