Holder of Guyana’s largest forest concession investigated for tax evasion in India

Sep 27, 2017 News

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An Indian businessman known for his famous coffee houses and with holdings stretching to Guyana is under investigation for tax evasion in his home country.
According to news reports from Business Today, on Sunday, days after Income Tax Department first raided the premises of India’s largest coffee chain – Cafe Coffee Day (CCD) – and that of its owner, VG Siddhartha, officials found Rs 650 crore concealed income from the documents seized. The discovery was made during search and seize operations on Sunday.
The documents seized from the search operations at 25 places of Cafe Coffee Day and its group companies in Karnataka, Mumbai and Chennai have revealed concealed income of over Rs 650 crore.
“There are a number of other issues, including violations of other statutes on which there is no disclosure but relevant evidence has been found. These will be pursued effectively as part of our investigation,” the report quoted a tax official, as saying.
In Guyana, Cafe Coffee Day has a local subsidiary, Vaitarna Holding Private Incorporated (VHPI), which is currently the holder of the largest single piece of forest concessions in Guyana-approximately 738,000 hectares, around the Wineperu area, in Region Seven.
VHPI has in the past come under scrutiny after several reports began to surface that the company was exporting raw lumber.
The exportations of logs rather than processing the timber locally, has long been a concern since numerous promises have been made by the previous administration and foreign investors about value-added operations. Rather investors, using bribes and Guyana’s vast terrain, concentrated on the raw log exports.
The concessions were awarded under the administrations of the People’s Progressive Party/Civic, which is in Opposition now.
According to the Business Today report in India, the raids, which started on September 21, were carried out on offices and residence of Siddhartha and the company’s other officials in Bengaluru, Chikkamagaluru, Hassan and Mysuru in Karnataka.
The corporate office of the Amalgamated Bean Coffee (ABC) Trading Company, which runs the CCD’s retail outlets across the country were also searched by tax sleuths.

Coffee Day Enterprises shares tumbled over 9% in an early trade on Monday. The shares of Coffee Day Enterprises were trading at Rs 208.95 down by more than 9.86%.
VG Siddhartha is the elder son-in-law of former Karnataka Chief Minister SM Krishna. Siddhartha is credited with creating India’s largest coffee empire.
By number of coffee outlets, Siddhartha’s retail chain till 2011 was among the top six globally, behind Starbucks, Dunkin’ Donuts, Tim Hortons, Costa Coffee and McCafe.
Siddhartha and his family own a coffee empire that stretches in over 10,000 acres of coffee estates in Chikamagalur, Karnataka. As of March 2015, the CCD group run 1530 outlets across 29 states of India. All the coffee served at Coffee Day outlets comes from the 10,000 acres of plantations that Siddhartha owns in Chikamagalur, Karnataka.
VG Siddhartha opened Cafe Coffee Day’s first outlet on Bangalore’s upscale Brigade Road in 1996. The CCD’s first launch came at a time when Bangalore was on the cusp of a transformation from a pensioners’ paradise to an IT and lifestyle haven.
Amidst press to ensure it built facilities for value-added activities in keeping with its agreement with Guyana, VHPI earlier this year insisted that it has fulfilled its commitment to Guyana to set up a wood processing facility to add value to the operations at Wineperu, Essequibo.
Under regulations, investors with certain size of concessions cannot be involved in logs extraction and exportation alone. Rather, there must be evidence of processing here.
The company claimed it installed a portable WoodMizer sawmill and two stationary mills.
It said that “as per its previous commitment, Vaitarna Inc. has installed three industrial WoodMizer LT 70 model saw mills, one WoodMizer EG 400 and one Woodmizer EG 300 model Edger at Wineperu, Region Seven.
While the Guyana Forestry Commission has accepted the Woodmizers as value-added, critics have blamed GFC of not ensuring that enough is being done for the value-adding aspects, which create more jobs and revenues for Guyana.
All the machines were said to be operational this year with the company capacity to produce approximately 350,000BM (825 m3) of lumber per month on an eight-hour shift.
Vaitarna claimed it had 136 employees of whom 126 are Guyanese (93 % of the total employees). All 17 of the sawmill employees are Guyanese, the company stated.
“The majority of the 126 Guyanese employees are from the local community of Wineperu. This employment generation has contributed visibly to the socio-economic development of the Wineperu community.”
The promise of value-added has been seen as a “sugar coating” to enable the export of large quantities of logs, particularly to China and India.

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