Nine Japanese shipping companies, which transport lumber from Sarawak, Malaysia, allegedly failed ...

(Kyodo) _ Nine Japanese shipping companies, which transport lumber from Sarawak, Malaysia, allegedly failed to report some 1.1 billion yen of income in total during a period of up to seven years through March 2006, sources close to the matter said Wednesday.
Such tax irregularities have occurred as the Tokyo Regional Taxation Bureau determined the companies' remuneration payments to a Hong Kong company, which has a connection with Chief Minister of Sarawak Taib Mahmud and his family, were rebates, not legitimate expenses, the sources said.
Although the Hong Kong agency did very little in the way of substantive work, the shipping companies are believed to have used rebates as a lubricant to facilitate their lumber trade, the sources added.
Lumber export is controlled by the Sarawak state government on grounds of forest resources protection.
Rejecting the tax authorities' conclusion, the shipping firms claim the transactions with the Hong Kong firm Regent Star have been legitimate and deny wrongdoing.
The companies accused of the alleged tax evasion include Mitsui O.S.K. Kinkai Ltd. and NYK-Hinode Line Ltd. belonging to the Nanyozai Freight Agreement (NFA), a cartel formed in 1962 to avoid excessive competition in import of lumber from Southeast Asia. The 12-member group is exempt from the Anti-Monopoly Law.
The shipping firms will likely be slapped with well over 400 million yen of back taxes along with heavy penalties, the sources added.
According to the NFA and other sources, the Japanese cartel concluded an agreement in 1981 with Malaysia's Dewaniaga Sarawak regarding lumber transport. Dewaniaga is a state-affiliated concern in charge of lumber export control and is headed by the Sarawak chief minister's younger brother.
The deal secured certain amounts of lumber for export for the NFA. On the other hand, the shipping companies ever since have paid "mediating charges," whose sums were tied to the amounts of lumber exported, to Hong Kong agency Regent Star as instructed by Dewaniaga.
Regent Star lobbied Dewaniaga to ensure the Japanese companies would be able to continue shipping lumber to Japan and the shipping firms posted the payments to Regent Star as expenses for transport operations.
The tax authorities, however, have concluded that the Hong Kong firm performed little work that deserved to be paid for and that the payments by the Japanese companies were kickbacks that went via Regent Star to senior Sarawak officials, according to the sources.