-Government grants zero-duty for Chinese business importing hardware materials to build hotel
-Finance Minister Sogavare defends decision saying GNUT is following policy to boost tourism
BY IRWIN ANGIKI & NED GAGAHE
More than $15 million in tax exemption has been given to a Chinese business, documents leaked to media on Tuesday this week show.
Two 100-percent tax exemption instruments signed by Finance Minister Manasseh Sogavare exempted Xiao’s Henderson Hotel Limited from a total duty cost of $15,265,619.79.
One for $9,487,014.66 and the other for $5,778,605.13.
Both documents were issued on July 31, 2024, valid for six months and taking effect on the date of issuance and expiring on January 31, 2025.
Finance Minister Sogavare, in an interview with Island Sun yesterday said the exemptions were government’s support to the development of the country’s tourism since the company was proposing to build a hotel.
“Exemptions are same as government direct assistance. It is indirect budgetary assistance to the investor. For that reason government has a serious responsibility to make sure that the recipient of exemptions properly use the exemptions.
“There’s nothing wrong with government assisting investors in this country.”
This is in line with the Government for National Unity and Transformation (GNUT) policies, Mr Sogavare said.
Sogavare adds that he has made three statements regarding tax exemptions last year following revelations by the Opposition of tax exemptions worth nearly $200 million and that he stands by them.
It is understood Xiao’s Henderson Hotel Limited (XHHL) is currently building its hotel on an area in Henderson, east of Honiara. The project has reportedly not met hotel requirements to have a swimming pool and bar.
Company Haus records show XHHL has a sole director, XIAO You Qiang, with total shareholdings owned by Xiao’s Hardware Company Limited, a separately registered retail and wholesale business solely owned by Mr Xiao, who hails from Guangdong, China.
Public records also contain Xiao’s Solomon Islands passport which was issued on October 20, 2014, and expired on October 20, 2024.
Xiao could not be reached for comment.
In defending this case of tax exemption, Finance Minister Sogavare said XHHL genuinely needed the exemption from the country’s harsh tax system in order to invest here.
“That group (XHHL) applied for exemption for equipping the Henderson Hotel they plan to build. They are investors in this country and have been spending money in this country. And with the country’s tax system of this country which is really killing it, it is not helpful.
“And as I explained in parliament, when we have a system that requires intervention by tax authority it is a tax system that is really structurally deficient, we’ll still have this kind of people that request tax exemptions because tax is really killing them.
“And they are investing money into this country in strategic sectors. And Xiao’s (XHHL) is investing in a very strategic sector fulfilling GNUT government’s policy of tourism, which we support the development of tourism sector.”
Sogavare said XHHL’s planned hotel will boost tourism by providing more accommodation for tourists, which government anticipates will increase following the direct and visa-free flight agreement with China.
“This is connected directly to government’s effort to open direct flights from China. And the minister of tourism is moving ahead to get more tourists into the country. We’re running out of beds, do not have enough beds in this country for tourists coming in. If tourists flood in from China, as a result of direct flights, we can reach a stage which people say we don’t go to Solomon Islands because they don’t have enough beds there although there is so much to see in this country.”
Sogavare said that XHHL was initially given only 50 percent exemption by the Tax Exemption Committee, which he later set at 100 percent after the company appealed.
“The committee granted 50 percent with no justification whatsoever. There’s two aspects to exemptions. One is the qualification to be granted exemption. This outlines if the applicant is investing in sectors which government is advancing national interests in.
“Once they qualify they move to the next stage where the committee will look into. Before I came in they were giving and recommending 100 percent exemptions here and there. When I came, I told them to review their recommendations. So, yes the buck stops with the minister, but he has to be properly advised on the reason why applicants are to be given a 100 percent or 50 percent.
“They appealed to me as minister, which is the normal process when investors are not satisfied with the exemption committee’s decision – they appeal to me as minister. So, when that happens I need all the information in order to make a decision.
“When they appealed to me there was no information from the exemption committee, which placed me in a very serious situation in which I could not make a decision either way, whether to uphold it, the committee’s decision, or review it.
“So, I fell back to the general policy of the government to assist the tourism sector in the country. And, they (XHHL) qualify 100 percent. They’ve been spending their money and they come back to me and say your committee has given us 50 percent only, but we cannot equip our hotel investment. Can you consider granting us 100 percent? That’s the information I had. I did not have any information from the committee. They failed miserably. So what else can I do? I have to believe our investor.”
Sogavare also refuted rumours that he had connections with XHHL.
“I do not have any connection with Xiao’s, I don’t know who they are. Some implication that I am connected with these people so they bribe me. I am insulted by those baseless implication. I have been in politics for 28 years and my reputation and character are very important to me. Receiving bribes is something outside how I run my politics.”
The finance minister reassured public that there is a mechanism in place to monitor and make sure investors given tax exemptions do not breach government’s conditions.
“There is a check mechanism. It is not all wrong. There is a managing and monitor system is ongoing. The investors will not utilise the full amount. As they import it triggers this monitoring system, and if they don’t comply, I as minister can revoke their exemption.”
Last year Opposition criticised government for granting nearly $200 million in tax exemptions to individuals and companies over nine months from January to September.
Opposition Leader Matthew Wale described this as ‘outrageous and reckless’.
The Opposition exposed some cases, which include two exemptions to Wan Chen Company totalling $29.3 million.
Wan Chen Company is owned by Harry Chen who also operates Goodwood Wharf, TBC Hardware Ltd and Injoy Restaurant.
Opposition also revealed that $30 million of tax exemptions were given to Lee Kwok Kuen, Anthony Veke, Nature Motel, and Wan Chen Company.
Sogavare following these revelations organised a press conference [Sunday, November 10] to rebut Opposition’s revelations.
Sogavare labelled Opposition’s revelations as misleading and defended the tax exemptions saying the practice was intended to boost critical infrastructure projects necessary for the country’s development.
But, Wale said there were no reasonable grounds, given the current precarious cash flow problem in government, for the Minister of Finance to award these exemptions.
He described Sogavare’s press conference as a cover up of the whole truth.
Meanwhile, the materials and equipment listed under the tax exemptions for XHHL include:
‘Deformed bars, round bars, cements, tire wire, foam seal plywoods, ceramic tiles; culture stones, vinyl tiles, fibro, PVC materials, Masonite, floor mesh wire, plaster board, base coat, cornic cement, top coat, tile fix, tile grout, exhaust pan, vinyl flooring, louvre glass, louvre frame, air conditionings, floor carpet, door closer, single and double door, roller gate, bare channel fittings, sprung roof, ceiling pan, single switches, double switches, power box, electrical adaptors, PVC conduits, PVC reducer squares, neutral link single pole switches, electrical fittings, paint brushes, PVC fittings, 2 unit mixer truck, 3 unit mixer machines, square tubes plumbing items, cables, electrical items, temporary external lift machine, 1000 set scaffold (interior s exterior), set iron scaffold stand 6800 pieces and building materials.’
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