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Disputes arise over MIRA taxing GMR

Shahudha Mohamed
26 May 2019, MVT 10:47
Former President Mohamed Nasheed pictured with officials of India's GMR Group at the main airport of the Maldives. PHOTO: MIHAARU
Shahudha Mohamed
26 May 2019, MVT 10:47

Local media Mihaaru reported that there were disputes regarding the USD 20 million in tax demanded by Maldives Inland Revenue Authority (MIRA) out of the USD 271 million paid in compensations by Maldives Airport Company Ltd (MACL) to India's GMR Group for nullifying the agreement between them.

In June 2018, MIRA instructed GMR, who had assumed responsibility of Velana International Airport (VIA) after registering a separate company under the name of GMR Male' International Airport, to pay USD 14.4 million as business profit tax, USD 2.8 million as withholding tax and USD 3.3 million in fines.

Although Attorney General Mohamed Anil of former President Abdulla Yameen Abdul Gayoom's government gave counsel to MIRA stating that GMR must pay the taxes, those with knowledge of the decisions made by Singapore International Arbitration Centre (SIAC) claim that GMR cannot be held accountable in this case.

According to informed experts in the field, it was decided in the arbitration that the compensation given to GMR was not inclusive of tax. They further state that if such a tax must be paid, the responsibility must be shouldered by the Maldivian government and MACL.

"MIRA can demand for taxes if the money makes its way into GMR's accounts. However, MACL must actually take the responsibility for it", a lawyer spoke to Mihaaru anonymously.

Additionally, Mihaaru reported that SIAC's decision stated that if tax were to be demanded from the USD 271 million, it must be included in the money paid by MACL to GMR, which means that GMR must get full compensation without any reductions.

Nevertheless, some other experts in arbitration state that the only tax that cannot be demanded from GMR by Maldivian authorities are withholding tax.

Therefore, the withholding tax requested from GMR by MIRA might not be a part of the USD 271 million, according to some sources that spoke to Mihaaru. They speculate that the withholding tax might have been pending payments by GMR during their time of handling airport operations.

This doubt could however not be clarified as MIRA has yet to give a statement about the matter.

Letter by MACL

On October 15, 2016, SIAC ordered MACL to compensate GMR with USD 271 million. MACL paid USD 80 million on November 10 and USD 191 million on November 15, 2016, settling the payment.

In a letter written to GMR following this settlement, the then-MACL Managing Director Adil Moosa signed and addressed a letter to GMR stating that the Maldivian government guaranteed MIRA will issue tax from the compensation money.

Despite the letter, former Deputy Attorney General Ahmed Usham stated that GMR was asked to pay business profit tax, on the counsel of foreign lawyers in the arbitration process by the former government.

"It was not a decision that was just made. The decision was made after referring to what the foreign lawyers said during arbitration and taking their advice into account", Usham said.

MIRA was notoriously accused of being a politically biased authority during former President Yameen's administration. MIRA took several measures targeting companies owned by those in support of the opposition. Due to this, some lawyers who spoke to Mihaaru suggested that GMR might also be one of the companies targeted by the former government.

AG Riffath's reply

A minor argument ensued on Twitter between Usham and Attorney General (AG) Ibrahim Riffath regarding the taxes MIRA demanded from GMR. Usham accused Riffath of claiming that GMR did not have to pay the taxes.

Riffath was amongst the lawyers representing GMR during the arbitration process between GMR and MACL. Therefore, Usham later stated that it was a conflict of interest for Riffath to advise on matters related to the case while filling the position of Attorney General.

However, a tweet by Riffath on Wednesday night addressed Usham's statements and offered an explanation to the public.

According to Riffath he "did not decide anything related to GMR" while in his position. He further assured that he always prioritised the best interests of the state and did not instigate any chances for discord.