Govt. asked to pay Virgin $9.2m

By Staff Writer ,

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“ ... Please accept this letter as our formal request for a refund of all excise paid on jet fuel purchased from PPS, amounting to US$4,020,659”

“ ... Please accept this letter as our formal request for a refund of all excise paid on jet fuel purchased from PPS, amounting to US$4,020,659”

Prime Minister Tuilaepa Sa’ilele Malielegaoi’s government has been asked to pay Virgin Australia US$4.02million (T$9.2m) in jet fuel excise rebates.

The demand is made in a letter to Prime Minister Tuilaepa obtained by the Sunday Samoan. Dated 29 May 2017, the letter is written by John Borghetti, the Chief Executive Officer of Virgin Australia.

It is in response to the notification from Prime Minister Tuilaepa, dated 12 May 2017, that Cabinet had decided not to re-new the Joint Venture between the government, Virgin Australia and owning entity Grey Investment Group.

“I would like to bring to your attention that Virgin Australia intends to continue to pursue the US$4m in jet fuel excise rebates, which is currently owed by the Samoan Government to the VSAM JV,” Mr. Borghetti writes. 

“I understand that the Special Negotiating Team is aware of this issue. Virgin Australia has been actively pursuing the repayment of these monies since April 2015, as noted in the attached letter to the Ministry of Revenue.”

The letter Mr. Borgetti is referring to was written by Geoff Smith, Virgin Australia’s Chief Financial Officer to the head of the Ministry of Revenue, Avalisa Viali-Fautua'alii on 22 February 2017.

“We write to you in relation to Virgin Samoa’s entitlement to claim a refund for excise paid on jet fuel purchased from Petroleum Products Supplies Ltd (P.P.S.) - the agent appointed by the Government of Samoa to undertake jet fuel distribution at Faleolo International Airport,” Mr. Smith’s letter reads.

“All payments made by Virgin Samoa to PPS for jet fuel until 30 June 2016 included an amount of excise at the rate of 0.28 Samoan Tala (SAT) per litre."

“Article 24 of the Convention on International Civil Aviation, to which Samoa is a signatory, provides that jet fuel for international air services shall be exempt from customs duty, inspection fees or similar national or local duties and charges." 

“This position is re-enforced in Article 13 of the Samoa-Australia Air Services Agreement, which provides that fuels shall be exempt from customs duties, excise duties, inspection fees and other national duties and charges.”

According to Mr. Smith, Virgin Samoa initially contacted the Ministry of Revenue in April 2015 seeking advice regarding the process and requirements involved with claiming a refund of excise paid on jet fuel. 

“Despite numerous follow up communications we were provided with insufficient information and guidance to allow us to commence our claim,” Mr. Smith’s letter continues.

P.M: Tuilaepa Sa'ilele Malielegaoi.
P.M: Tuilaepa Sa'ilele Malielegaoi.

“Further communication was made with your office via a formal letter, dated 16 March 2016, requesting further guidance in relation to the process for initiating our claim for a refund of excise paid."

“Finally, a conference call was undertaken with your office and members of the Virgin Australia Group, along with follow up emails, where it was confirmed that a member of your office would provide us with the relevant information to enable us to commence our refund claim. We are disappointed that no such guidance has been forthcoming."

“As a result of our continued attempts to seek sufficient guidance to commence our claim, without an appropriate response, please accept this letter as our formal request for a refund of all excise paid on jet fuel purchased from PPS, amounting to US$4,020,659.”

It was not possible to get a comment from the Ministry of Revenue at press time. The government has been on holiday since Thursday to celebrate the 55th Independence Day. 

Prime Minister Tuilaepa has also left the country for a meeting New York, United States of America.

In the meantime, getting back to the issue of the non-renewal of Virgin Samoa Limited Joint Venture, Mr. Borghetti told Prime Minister Tuilaepa they are reviewing their options. 

“Virgin Australia confirms receipt of the letter dated 12 May 2017 outlining the Samoan Government’s intention to end the Virgin Samoa Limited Joint Venture between the Government of Samoa, Virgin Australia and Aggie Grey’s Hotel Limited (‘VSAM JV’),” Mr. Borghetti writes.

“The Virgin Samoa Board approved at the Board meeting on 12 April 2017 to extend the Management Agreement between Virgin Australia Airlines Pty Ltd and Virgin Samoa Limited and the Wet Lease Agreement between Virgin Australia International Airlines Pty Ltd and Virgin Samoa Limited until 12 November 2017 to allow time for both parties to assess the future of the VSAM JV." 

“This date, unless otherwise agreed, represents the end date of the management and wet lease services Virgin Australia provides to the VSAM JV."

“However, the Virgin Australia team is in the process of assessing its own options in relation to the Samoan travel market and will engage with the Samoan Government on an appropriate legal and operational exit from the Shareholders’ Agreement between the Government of Samoa, VB Investco Pty Ltd, Aggie Grey’s Hotel Limited and Virgin Samoa Limited, and the subsequent dissolution of the VSAM JV." 

“I would be grateful if you could nominate a representative from the Samoan Government with whom Virgin Australia can work to discuss and facilitate the exit of the Shareholders’ Agreement and transitional measures as operations under the VSAM JV cease."

“I would like to take this opportunity to thank you and the Samoan government for your participation in the VSAM JV and wish you the best for the future.”

© Samoa Observer 2016

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