Tax Liabilities floodgates open for more prosecutions

The court interpreted the meaning of "gift due to moral obligation", under which the recipient can be exempt from personal income tax payment. Deposed prime minister Thaksin Shinawatra's wife Pojaman claimed she did not pay tax on the transfer of shares to her adopted brother Bhanapot Damapong because it was "a gift under a moral obligation".

However, the court said the claim was not valid and found Pojaman guilty of intentionally avoiding tax payment of Bt546 million for the transfer of 4.5 million Shinawatra Computer and Communications shares worth Bt738 million. Found guilty on the same charges were Bhanapot and Pojaman's secretary Kanjanapa Honghern.

The court sentenced Pojaman and Bhanapot to a total of three years in jail each - two years for the charges relating to the conspiracy to evade tax and one year for giving falsified statements. Kanjanapa faces two years in jail.

The court said the three defendants had committed serious crimes and filed false statements with the government agencies in order to avoid paying taxes. They intended not to pay taxes despite the fact that they were wealthy people.

The court ruled that the prosecution's evidence was solid and indisputable. The three suspects were found guilty of fraud or collaboration to evade taxes. In addition, Pojaman and Bhanapot were found guilty of filing false claims and presenting false evidence to the authorities with the intention to avoid paying taxes.

The court also reprimanded Pojaman in particular, saying that with her high economic, social and political status - especially her status as the wife of the country's then leader - she should have acted as a good example to society.

The Criminal Court ruled out every defence argument in the tax evasion case as insubstantial in rebutting the prosecution evidence.

The court said the prosecution had proven beyond reasonable doubt that the defendants committed a conspiracy to evade tax. The ruling declared that Pojaman and Bhanapot made the share transfer in the stock market in order to avoid tax liabilities even though there was no real transaction.

Bhanapot admitted Pojaman gave shares to him and the court found this was not a family gift. The ruling addressed a key legal issue - whether the three defendants intentionally gave falsified statements to the authorities in order to avoid tax liabilities.

The charges were from transactions which took place in November 1997, and come under the criminal codes of Article 37 (1) (2) of the Revenue Code. Violation of this law is punishable with a fine of between Bt2,000 and Bt200,000 and a jail sentence of between three months and seven years. A multiple violation of this law will result in a jail sentence of not more than 20 years.

The Office of the Attorney General filed the suit on March 26 last year, summoning more than 30 prosecution witnesses to testify including Sak Korsaengruang, spokesman for the now-defunct Assets Examination Committee, who chaired the panel that probed the accusation of tax evasion, and former Finance Ministry permanent secretary and former director-general of the Revenue Department Suparat Kawutkul.

The three defendants denied the charges and almost 20 defence witnesses testified in the case.

The definition of "gift offered for moral obligation" in the Revenue Code's section 40 (10) was the theme of this high-profile tax-evasion lawsuit. Defence lawyers tried to argue that Khunying Pojaman in 1997, gave 4.5 million shares of Shinawatra Computer and Communication (later renamed Shin Corp) worth Bt738 million to her brother Bhanapot on the basis of moral obligation. The tax payment and fine in the case was calculated to be Bt546 million.

Under section 40 (10), the recipient of a gift of this nature is not required to pay personal income tax on it.

The Court yesterday ruled that the law does not give a definition of the phrase "gift offered for moral obligation". The court therefore referred to Thai dictionary BE 2542, which explains that the giver wants to help or support the recipient and the giver also has a moral duty to do so.

The court said that interpretation of the Revenue Code has to be very strict and that those who receive such gifts have to deserve them.

The court ruled that the first defendant, Bhanapot, did not deserve such a gift because he already had wealth, being chairman of Shinawatra Computer, earned Bt23.5 million in 1997 and owned 2.3 million shares in the company and 23 million shares in SC Asset, its subsidiary.

Although Bhanapot was not as rich as his relative Pojaman, he was not in need of a gift by moral obligation, said the court.

The Criminal Court discarded previous Supreme Court verdicts raised by the defendants, saying they did not fit this case since the people in the other cases were in need of gifts under moral obligation.

The court also said the three defendants had fabricated share transactions in the stock market to evade personal income tax payment.

The court ruled that the three defendants should have behaved as good citizens and tax evasion is unjust to society. The size of their tax payment would have been very small compared to the assets the defendants had, said the court, so they were found guilty of "grave wrong-doing".