Tax troubles

A liner agent had been paying 2.5% of all freight, paid on export cargo to the local tax authorities. Local regulations made the local agent jointly liable for the tax with the foreign carrier.

When the agent’s financial controller left the company it was discovered that for a two year period the agent had not paid the tax during which time 24,000 TEUs had been exported. The apparent reason for the failure to pay freight tax was an enquiry made as to what items should be eligible for freight tax (whether it was just sea freight or included payments for road transport and other charges). Without consulting the principal or senior management the financial controller had made no payments while the issue was unresolved.

The unpaid tax amounted to US$ 425,000 and this was paid to the authorities out of the funds held back by the agent. The tax authorities charged interest on the sum which had to be met by the agent. ITIC reimbursed the agent the sum of US$ 86,000 under the terms of their entry.