Nine Japanese shipping companies that transport lumber from Sarawak, Malaysia, allegedly failed to report some 1.1 billion yen of income in total during a period of up to seven years through last March, sources said Wednesday, alleging the money constituted kickbacks to Sarawak officials via a Hong Kong agent.
Such tax irregularities have occurred as the Tokyo Regional Taxation Bureau determined the companies' remuneration payments to Regent Star, a Hong Kong agent, which has a connection with Chief Minister of Sarawak Taib Mahmud and his family, were rebates, not legitimate expenses, the sources said.
Although the Hong Kong agency did very little in the way of substantive work, the shipping companies are believed to have used rebates as a lubricant to facilitate their lumber trade, the sources added.
Lumber export is controlled by the Sarawak state government on grounds of forest resources protection.
Rejecting the tax authorities' conclusion, the shipping firms claim the transactions with Regent Star have been legitimate and deny wrongdoing.
The companies accused of the alleged tax evasion include Mitsui O.S.K. Kinkai Ltd. and NYK-Hinode Line Ltd. belonging to the Nanyozai Freight Agreement (NFA), a cartel formed in 1962 to avoid excessive competition in import of lumber from Southeast Asia. The 12-member group is exempt from the Antimonopoly Law.
The shipping firms will likely be slapped with well over 400 million yen in back taxes along with heavy penalties, the sources added.
According to NFA and other sources, the Japanese cartel concluded an agreement in 1981 with Malaysia's Dewaniaga Sarawak regarding lumber transport. Dewaniaga is a state-affiliated concern in charge of lumber export control and is headed by the Sarawak chief minister's younger brother.
Dewaniaga Sarawak (DNS), a company affiliated with the Malaysian state of Sarawak, instructed NFA members to pay so-called intermediation fees to the Hong Kong agent, Regent Star (RS). DNS is headed by Onn bin Mahmud, a brother of Sarawak Chief Minister Abdul Taib Mahmud. The Chief Minister's brother Onn bin Mahmud also sits on the board of CMS. Not only is Abdul Taib Mahmud Chief Minister, he's also the Resource Management and Planning Minister. That means he's also the Forestry Minister.
The Japan Times: Thursday, March 29, 2007
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