Friday, July 01, 2011

Huge Tax Claims Behind Reddy Group Success

Posted on Coup Four Point Five - 01 July 2011

Source: tax claims of up to 55% behind Reddy Group success

Tanoa Tusitala Hotel Samoa. Below left YP Reddy

Coupfourpointfive readers were introduced to businessman YP Reddy in recent weeks, via a story highlighting a $5 million civil claim against him plus a call by some for the illegal regime to move on Reddy for fraud amid speculation he is being spared because of his friendship with Frank Bainimarama. Background information from well-placed sources now reveal Reddy is one of the 'business elites' who have cunningly worked the system and who has benefited through something as simple as dodgy tax claims. 
The Reddy Group started out as a family construction company but now operates hotels, financial investments, real estate and insurance. YP Reddy has held many directorships on government and state owned companies such as Fiji Electricity Authority, Fiji Development Bank and Fiji National Provident Fund and is a life member of the Fiji Hotel Association. He has also received the lifetime achievement in excellence award for tourism in Fiji in 2000 and is a former chair and current trustee of the NFP.
Yanktesh Permal Reddy(or YP Reddy as he is more commonly known) appears to have built his six hotels in Fiji through Tax scams from the Hotel Aid Act (HAA) amended over the years and currently known as Income Tax Act Schedule 11 Decree 2009. Just like other major Hoteliers, YP Reddy has been providing  favours to Government for favourable tax claim approvals such as Sponsoring the MSG Spearhead Group Meeting a few months ago in return for favourable Tax claim approvals.  It is a big scam involving players from all political camps, different ideologies but all united under this scheme because of the returns they offer. 
It is bigger than the Agricultural Scam and involves reputable accounting and legal firms and major players in Australia and New Zealand.Through this tax claim of building and renovating hotels, they claimed back 55% of the cost of the building and maintenance, minus the cost of the land and furniture. Through the 55 % Tax Claimable Allowance under the Income Tax Act Schedule 11 (earlier known as HAA), this manipulative elite group of hoteliers and businesses literally built their empires from Government Revenue Claim Funds at FIRCA.
According to well-placed sources from FIRCA, they collude with hardware shops and work contractors/consultants and accountants to put up the prices so that the Tax Claim of 55% (over the next eight years of loss) of the total cost used in the building or renovating of the hotels are so high, they can clear their mortgage and then have extra funds spared in the kitty for other self-interests and to reinvest or be siphoned overseas.Sources say YP Reddy and the likes in the Fiji Hotel and Tourism Associations (FHTA) are all guilty of the practice. Sources say they have influenced the Government System so much and have been key advisors to past Governments and are now also advisors to this Government in the write up of the country's Fiscal Policies and the finalization of the Annual Government.There have been coup in and coup out with numerous Governments changeovers but these players remain the same; and they quietly manipulate our political and financial systems including our media outlets to serve their propaganda.Their current move is to aim for a land grab through the Land Bank and to acquire as many Land and Government State Companies as possible in order to continue with their so called “Investments” that Fiji people we are not aware are funded by Government Funds. They would rather public and the civil servants be paid from the FNPF while they (businessmen and  hoteliers) manipulate our Revenue Base at FIRCA through such Tax claim laws while the rest of Fiji operated from the FNPF Funds and overseas loans of millions and millions of dollars. 
Sources say the dictator does not have a clue of what is happening despite all the warnings that have been provided  by the different intelligence groups with many saying the relevant information has been manipulated by the illegal attorney general, Aiyaz Sayed Khaiyum, by the time it reaches him.
Our key source says what needs to be noted from this revelation is that:
1) Certain hoteliers in their own lifetime, remember not their fathers, or grandfathers, but just one person’s lifetime like YP Reddy have acquired apart from the overseas hotels the following local hotels; Nomad Skylodge Hotel-Nadi, Tanoa International Hotel-Nadi, Tanoa Apartments-Nadi, Tanoa Rakiraki Hotel, Tanoa Plaza-Suva and Tanoa Waterfront-Lautoka. Considering the inflow of tourism numbers over the years and the expenses of operating a hotel with wages etc, it is quite an unbelievable feat for someone to have gone this far. In 2009 (facts and proof will be provided in the right forum), YP Reddy just painted and did some minor repair works yet claimed 55% tax allowance of over the next eight years loss at a total of $100,000 from FIRCA for the Rakiraki Hotel kitchen. Those who have been to the hotel will know that, it is just the kitchen, not the whole building of Rakiraki hotel or the dining room but that small spaced kitchen that was renovated.

2)  The Commerce Commission Hardware Prices Investigation was undertaken after a Report on the Tourism Revenue Status and the Tax Scam was exposed to the Peoples Charter committee.
3) The Accounting Monitoring Body that was setup last week by Government is also a direct result of this exposure.
4) The biggest loser in Fiji’s Tourism Industry are the Landowners as they collect only $4.7 million in (5% Gross) Land Rent from the estimated $900million Tourism Revenue for providing the Land for Tourism with the free Qoliqoli. (Source NLTB)
5) The second biggest loser is Government with only $24 million (5%) returning to Government’s Revenue base through HTT (Hotel Turnover Tax) from all that Tax concessions been allowed. (Source FIRCA). Even for one hotel development,  Naisoso Island Development has been granted $426 million Tax Concession in 2009. (Source Ministry of Finance). Imagine the Tax Claims of the rest of the 334 hotels. What is the use of such Fiscal Policies when the return is such a small amount of Governments Revenue of only 1% contribution by Tourism (Source FIRCA). This is not to mention the annual Tourism Fiji (Fiji Visitors Bureau) marketing grant of $24 million and its non-transparent utilisation.
6)  Accountants of these hotels provide two sets of Books; 5% gross to NLTB of only $4.7 million and 5% to Government of $24 million in 2010. Something is amiss here. If it is both 5%, then they should both have the same figures. Who is hiding something here?
7)   If 5% of HTT is $24 million in 2010 that have been taxed by Government, then 100% is $480 million. So where is the estimated $900 million announced by Reserve Bank go to? The majority of tourism funds stay overseas and the rest goes back as Leakage through the payment of the suppliers of hotel operations.
8) In 2009, the total of the Tourism Concession given to the tourism industry was $1.4 billion compared to the Revenue that was coming in of $22 million HTT (Hotel Turnover Tax). What is the justification for this with all the low wages, low land lease etc, high leakage, high environmental impact etc where are the benefits of Tourism that have been harped about?

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