The eight-year-old Turkish company BMET Cable produces energy and telecommunication cables. Employing 788 people, it produces 40tn of cables a day. The company has never been without trouble, such as a shortage of foreign currency, but the allegations made against it recently by the Ministry of Revenues has come as a blow to the staff.

The Ministry accused BMET and 165 other companies of tax evasion last month after an investigation conducted by the National Intelligence & Security Service (NISS) and the police.

As a result, 16 people are currently under arrest for transacting over 51 million Br with no service or goods to offer. The Ministry also alleged that 136 of the companies transacted over 6.9 million Br.

BMET is suspected of using forged receipts to claim heavy losses. It notified the tax authorities of 1.5 billion Br in losses and allegedly now owes the Ministry 670 million Br in unpaid taxes since 2014.

“To confirm such losses, the company presented forged receipts,” said Sisay Gezu, tax fraud investigation director at the Ministry. “After an investigation of the claimed losses, the company was caught attempting to claim refunds.”

BMET mentioned depreciation of its machines and buildings as a reason for its losses. The company is also finding it difficult to obtain foreign currency to buy inputs and is now producing only two tonnes of cable a day. As a solution, it recycles scrap copper to reduce the shortage of inputs.

“We were suspected of buying forged invoices rather than items, because they haven't seen the profit they expected,” said an employee of BMET that requested anonymity. “However, we have documents to prove that there were transactions.”

BMET’s management claims that they purchased scrap copper from governmental organisations such as the Public Procurement & Disposal of Public Assets Authority, Ethio Telecom, Ethiopian Electric Utility and Metals & Engineering Corporation (MetEC). The purchases were made in cost per order (CPO) and in cash, the company claims.

“The cash register system eases things for forging receipts,” said Sisay. “What we recommend is changing the cash register system into an electronic invoice, which helps to ensure the originality of invoices on the spot using the database on our website.”

The ongoing case between BMET and the government is an example of the latter’s crackdown on businesses that allegedly produced fake receipts. In the past fiscal year, the Federal Police Commission Tax & Custom Crime Investigation Bureau investigated cases of crimes related to trade. Among these, 117 of them were sent to the Attorney General’s Office. From a total of 716 cases that the Bureau investigated, 291 involved contraband.

Judgment has been given on almost half of the cases that were investigated, according to the Bureau. In the last fiscal year, after an investigation into tax evasion, the government reclaimed 15 billion Br.

It is the construction industry that is considered most exposed to tax fraud. There is no means of identifying the amount of input, such as reinforcement bars in a given building, in the industry.