Issue link: https://maltatoday.uberflip.com/i/1508267
2 maltatoday | SUNDAY • 24 SEPTEMBER 2023 NEWS Oil trader on €2.3 million tax audit claims rights breach MATTHEW AGIUS THE oil trader at the heart of the 2013 Enemalta oil scandal – George Farrugia – is claim- ing that the refusal of his ob- jection to the Tax Compliance Unit's audit of his undeclared earnings, is a breach of his fundamental rights. Farrugia, who in 2013 was granted a presidential pardon to reveal his actions in paying bribes or 'commissions' to En- emalta's top brass, including its then-chairman Tancred Tabone, had his company Ai- kon Limited audited by the TCU in October 2013. Aikon was used by Farrugia to siphon monies made by lu- bricants business Powerplan, which fell under his fami- ly's holding company John's Group. He fell out with his siblings, also partners in the fami- ly company, who suspected he had been funnelling un- declared commissions on oil sales to a secret Swiss bank ac- count owned by Aikon. Farrugia's contestation to the TCU concerns an audit carried out over Aikon's business be- tween 2004 and 2010, in which the tax auditors increased his chargeable income by €2.37 million: these comprised, among other things, €441,000 in undeclared commissions, €382,000 in payable commis- sions – reduced from €1.2 mil- lion – a drag racing donation of €36,000 that was disallowed, €46,000 in travel expenses that were disallowed, and a €1 mil- lion deduction which the TCU reduced to €106,000. Additionally, his tax assess- ment was only finally issued in 2023, nine years after the start of the TCU's audit, which Far- rugia is now insisting is time- barred by the maximum five- year period stipulated at law. Farrugia's appeal is against the Tax Commissioner's re- fusal to his objection on the TCU's higher assessment of tax due from Aikon, arguing that he had been ordered to pay an additional €27,000 in tax, in breach of the compa- ny's fundamental rights. In a letter sent to Aikon in March 2023, the Commis- sioner said that the company's contestation could not be up- held, and accused the com- pany of not having declared all the income it generated in 2011, failing to provide con- clusive evidence of the gener- ated income, as well as failing to substantiate any deductions it claimed with "appropriate evidence and explanations." After taking into account profits and losses on its invest- ment portfolio, interest, and bank charges amongst other factors, the company's charge- able income for the period 2004 to 2010 was increased by €2,378,068. In an appeal filed in July 2023, Farrugia's Aikon argued that the additional €27,000 tax imposed on it constituted a breach of the right to peace- ful possession of property be- cause "despite the delays on the part of the defendant Tax Commissioner to issue the rel- ative estimate and conclude his investigation, the inter- ests and additional tax on the omission began and continued to accumulate, and are still ac- cumulating to this day in spite of this appeal." His lawyers – Siegfried Borg Cole, Arthur Azzopardi, Keith Borg and Celine Cuschie- ri Debono – said Aikon had first been informed of the tax audit in May 2012, and had striven to provide the docu- mentation and relevant expla- nations to the TCU so that the assessment could be complet- ed within a reasonable time- frame. The assessment was later issued in October 2013, and Aikon filed objections in 2014. "Despite this, the defendant Tax Commissioner took nine years to issue the Liquidation of Tax due for the year of as- sessment 2011," the company said, pointing to the assess- ment which was finally issued in March 2023. Because of this, Aikon Limit- ed is contending that the letter was time-barred, as it had not been served on the company within the five-year period stipulated at law. This delay on the part of the Tax Commissioner had also led to an exorbitant amount of interest accumulating over the years, which the company described as "ironic and mani- festly unjust." Farrugia's lawyers said the additional penalties imposed by the Commissioner were al- so unjust, and imposed in an arbitrary manner, as the law did not provide a mechanism by which to calculate them ob- jectively. Additionally, he claimed the Tax Commissioner had calcu- lated the company's income on the basis of income received by third parties, made mistakes in the calculations and assessed its capital in a manner that was not in conformity with in- ternational audit standards. Farrugia is calling on the Ad- ministrative Review Tribunal to revoke the Commissioner's decision to reject its objec- tions and the subsequent liq- uidation of additional tax, as well as to declare the addition- al tax imposed on it to breach its fundamental rights, as safe- guarded by the European Con- vention on Human Rights and the Constitution. The Tribunal was also asked to arrive at and award a sum in damages should it find a breach. Farrugia's secret operation The John's Group subsidiary Powerplan, run by George Far- rugia, had exclusivity agree- ments with oil giants Total and Trafigura which legitimate- ly entitled the company to a commission of $1 per metric tonne of oil sold to Enemalta. But Farrugia would also in- voice some of the sales under his own personal company Ai-