Yelge Qaitaru Foundation: Timur Kulibayev and Lakshmi Mittal illegally avoided tax payments

As it became known from open sources on the Internet, in November 2009, the state oil com­pa­ny Kazmunaigaz acquired 100% of the shares of Mangistaumunaigaz, as a result of which the bud­get of Kazakhstan lost 1.8 bil­lion US dollars.

According to tax leg­is­la­tion, an increase in the val­ue of a Kazakh asset is sub­ject to tax­a­tion in the ter­ri­to­ry of the Republic of Kazakhstan. In this case, such an asset is the shares of JSC Mangistaumunaigaz.

As you know, this oil-pro­duc­ing enter­prise was once sold to a for­eign investor, some Indonesian com­pa­ny Central Asia Petroleum Ltd., for a rel­a­tive­ly small amount, although even then it was one of the largest in the coun­try with an annu­al pro­duc­tion of about 5–6 mil­lion tons of oil.

By the way, the ques­tion of who was the share­hold­er of Central Asia Petroleum Ltd. and, accord­ing­ly, JSC Mangistaumunaigaz, still remains unanswered.

From the doc­u­ments post­ed on the Internet, it fol­lows that 28% of the shares of the Indonesian com­pa­ny through off­shore struc­tures belonged to Timur Kulibayev and his part­ner, an English bil­lion­aire of Indian ori­gin Lakshmi Mittal. But the own­er of the remain­ing 72% of the shares is still unknown.

100% of the shares of JSC Mangistaumunaigas were bought for $2.6 bil­lion by the off­shore com­pa­ny Mangistau Investments B.V., owned by the Chinese CNPC Exploration and Development Company Ltd. and Kazakh nation­al com­pa­ny KazMunayGas.

The deal was not for­mal­ized as a direct pur­chase, but as a sale and pur­chase of shares on the Kazakhstan Stock Exchange. This was done in order to take advan­tage of the norm con­tained in the Tax Code and pro­vid­ing: if the shares were sold and, accord­ing­ly, bought on the stock exchange dur­ing open trad­ing, then the increase in val­ue on them is not sub­ject to income tax.

However, from the doc­u­ments post­ed on the Internet, it irrefutably fol­lows that the pur­chase and sale of 100% shares of JSC Mangistaumunaigaz on November 25, 2009 at KASE was a direct deal dis­guised as an open trade.

The fol­low­ing stub­born facts evi­dence this. Firstly, the buy­er and sell­er were known in advance — almost a year before the trans­ac­tion. Secondly, there was only one buy­er. Thirdly, since the sub­soil user’s shares were sold, and in such cas­es the leg­is­la­tion requires pri­or per­mis­sion from the com­pe­tent state body, there could not be tar­get­ed, open trades in shares of JSC Mangistaumunaigaz at KASE in principle.

Since, accord­ing to Kazakhstani leg­is­la­tion, the pur­chase and sale of Mangistaumunaigaz shares was actu­al­ly car­ried out by the “direct trans­ac­tion method”, the sell­er com­pa­ny Central Asia Petroleum Ltd. had to pay tax on prof­its aris­ing from the increase in the val­ue of Mangistaumunaigaz shares to the bud­get of the Republic of Kazakhstan.

According to the tax leg­is­la­tion of the Republic of Kazakhstan, income from the increase in the val­ue of shares is taxed at a rate of 20%. The sell­er (Central Asia Petroleum Ltd.) car­ried out its activ­i­ties in the Republic of Kazakhstan through its branch and rep­re­sen­ta­tive office. Consequently, Central Asia Petroleum Ltd. must have paid an addi­tion­al tax of 15% on the net income of the per­ma­nent establishment.

The ini­tial val­ue of Mangistaumunaigaz shares was 719.7 mil­lion US dol­lars (10,795,530,2000 tenges). Thus, even with the declared fic­ti­tious sale price of Mangistaumunaigaz shares in the amount of $2.6 bil­lion, the amount of tax should be at least $652.4 mil­lion, tak­ing into account the fact that cap­i­tal gains amount­ed to $1.9 billion.

The ques­tion aris­es about the real mar­ket val­ue of JSC Mangistaumunaigaz. In fact, this oil-pro­duc­ing enter­prise should cost at least 6 bil­lion US dol­lars. Moreover, the under­es­ti­ma­tion of the pur­chase price to 2.6 bil­lion and reg­is­tra­tion of the acqui­si­tion not direct­ly at CNPC Exploration and Development Company Ltd. and KazMunayGaz, were made on pur­pose for the off­shore com­pa­ny Mangistau Investments B.V.

Accordingly, the increase in the val­ue of the Kazakh asset was ini­tial­ly cal­cu­lat­ed at $1.9 bil­lion, in real­i­ty, reached $5.3 bil­lion. And the unpaid income tax to the state bud­get of Kazakhstan equalled $1.8 billion.

Since it fol­lows from the doc­u­ments avail­able on the net­work that 28% of the shares of JSC Mangistaumunaigaz through the Indonesian com­pa­ny Central Asia Petroleum Ltd. belong in equal shares to Timur Kulibayev and Lakshmi Mittal, then you can cal­cu­late your­self how many of the above-men­tioned bil­lion­aires from the list of the American Forbes mag­a­zine saved on taxes.

We ask you to check these facts and, if these cir­cum­stances are con­firmed, take mea­sures to bring the per­pe­tra­tors to jus­tice and com­pen­sate for the dam­age caused to the state.

Your response will be brought to the atten­tion of the pub­lic and mass media.

Best rea­grds,

Bulat Abilov

Urazaly Yerzhanov

From:

Mr. Abilov B.M.

Mr. Yerzhanov U.S.

Yelge Qaitaru Foundation, 42V Ivanilov street, Almaty, Kazakhstan

To:

Mr. Asylov B.N, Prosecutor General of the Republic of Kazakhstan

Mr. Akhmetzhanov M.M., Minister of Internal Affairs of the Republic of Kazakhstan

Mr. Bektenov O.A., Chairman of the Agency of the Republic of Kazakhstan on com­bat­ing corruption

Mr. Elimanov Zh.K, Chairman of the Agency of the Republic of Kazakhstan on finan­cial monitoring

July 27,2022

Original link to claims on the web­site: Government of the Republic of Kazakhstan

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