Loss Assessment

Aug 22, 2008 (LBO) – Sri Lanka’s John Keells Holdings (JKH) said a write-down at its bunkering unit could amount to 1.3 billion rupees after the firm lost a tank farm and a tax holiday, but the group was hopeful of capping losses at 704 million rupees. Following a Supreme Court decision that cancelled its tax holiday Sri Lanka’s revenue authorities had demanded 750 million rupees in back taxes from Lanka Marine Services (LMS), a former state-run bunkering unit which is 99.44 percent owned by JKH.

JKH said based on “opinions from independent legal counsel and tax consultants” LMS believed that it should be treated as an export company, and pay only 15 percent tax.

At that rate it would only have to pay 384 million rupees in back taxes, and 134 million rupees for the 2007/2008 financial year.

LMS had been asked to vacate a tank farm, for which court had given time till September 10, following an appeal by the company.

LMS has also applied to Sri Lanka Ports Authority to lease the land in which the tank farm is located. Write-downs and shifting costs would be 187 million rupees.

JKH said its balance sheet would be hit by a charge of 704 million rupees in taxes, shifting costs and write-downs if revenue authorities charge income