Identifier
Created
Classification
Origin
05KINSHASA2072
2005-12-21 11:16:00
CONFIDENTIAL
Embassy Kinshasa
Cable title:  

TAX AUTHORITIES ARRESTED FOR CORRUPTION

Tags:  EFIN KCOR EINV ECON PGOV CG 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L KINSHASA 002072 

SIPDIS

TREASURY FOR LKOHLER

E.O. 12958: DECL: 12/20/2015
TAGS: EFIN KCOR EINV ECON PGOV CG
SUBJECT: TAX AUTHORITIES ARRESTED FOR CORRUPTION


Classified By: Econoff W. Brafman for Reasons 1.4 b/d.

C O N F I D E N T I A L KINSHASA 002072

SIPDIS

TREASURY FOR LKOHLER

E.O. 12958: DECL: 12/20/2015
TAGS: EFIN KCOR EINV ECON PGOV CG
SUBJECT: TAX AUTHORITIES ARRESTED FOR CORRUPTION


Classified By: Econoff W. Brafman for Reasons 1.4 b/d.


1. (C) Summary: The GDRC's tax authority is grappling with a
high-level scandal that also implicates several large
enterprises. In October, Congolese authorities arrested the
director of the national tax authority, Direction Generale
des Impots (DGI),plus other DGI officials and
businesspersons in connection with a tax credit scheme.
Since the arrests, the DGI has begun demanding restitution
from several large businesses who participated, whether
wittingly or not, in the tax credit scheme. The Presidency
is now overseeing an investigation of this matter. End
summary.


2. (C) The week of October 10, Congolese authorities arrested
the DGI director general and two other high-level DGI
officials on charges of embezzling as much as USD 10 million
from the GDRC by creating fictitious GDRC tax credits and
profiting from their sale. For several years, a DRC company,
Cabinet Lumiere, has arranged the transfer of GDRC tax
credits from small and medium private enterprises to large
companies which wanted to pay their tax bills with discounted
credits. Some of these tax credits may have been legitimate
(note: from small and medium companies that had overpaid
their tax bills and held tax credits because the GDRC was
unable to refund their money),but others had allegedly been
created out of thin air by individuals at the DGI. Originally
the National Security Police made the arrests pursuant to an
order from the President's office, but judicial authorities
are now overseeing the legal process. The Public Auditor
(Cour des Comptes) is conducting an investigation of the
scheme and has already released some findings, including
statements that the amount embezzled was close to USD 30
Million and that the sale, purchase, and use of tax credits
is strictly illegal.


3. (C) Following the arrests, the GDRC began demanding
restitution from companies that participated in the scheme by
paying their taxes with discounted credits. The Managing
Director (MD) of a large American-owned company operating in
the DRC told EconCouns that his company and many others
believed the practice was legal and have used the method for
years. (Note: Officials at SEPCongo, the majority state-owned
oil and gas distribution company, told EconCouns that it had
used discounted tax credits since 2003; two SEPCongo
officials spent days in National Security Police custody
before being released and later detained again in connection
with the tax scheme's investigation. End note.) A SEPCongo
board member told us that he believes that while Sepcongo's
highest official likely was unaware of any illegal activity,
other SEPCongo officials knowingly participated in the scheme
illegally. He also said that managers of the other companies
who participated were either very naive or intentionally
ignorant.

Comment
--------------

4. (C) While companies which participated in the scheme
claim innocence, most established businesses in the DRC know
that something that seems to good to be true probably is.
Thus, even if the businesses did not deliberately violate any
laws, they may have been willfully ignorant. In any case, and
whatever the motivation for the crackdown, any step taken to
rein in corruption is a welcome move. End comment.
MEECE