…CCJ dismisses appeal in $3.8B unpaid tax case

THE CARIBBEAN Court of Justice (CCJ) on Monday dismissed the appeal by Guyana Stores Limited (GSL) to have among other things, the court rule that the Guyana Revenue Authority (GRA) and the State violated its constitutional right to the protection of property.

GRA had demanded that Guyana Stores pay to it some $3, 811, 346, 397 for the years of assessment 1985 – 2010. However, Guyana Stores made a claim for constitutional relief in a tax dispute with the GRA because the Authority failed to assess the taxes payable by the company in accordance with the provisions of Sections 70 and 78 of the Income Tax Act.

GSL had approached the local courts in 2012 to declare that the GRA’s request for unpaid taxes represented a violation of its constitutional right to protection of property. The matter was first heard in the High Court by Chief Justice (ag) Ian Chang, who at the time granted Conservatory Orders without hearing the GRA or the Attorney General (AG) of Guyana.

Justice Chang had subsequently discharged those orders on application by the respondents, after considering their written submission and the court file. In so doing, the learned Chief Justice (ag) struck out the entire claim on the ground that a claim purely for declaratory relief with no consequential and executory orders cannot be maintained.

GSL then appealed the decision of Justice Chang and that court (CCJ)upheld the decision to strike out the action because there was no violation of the company’s constitutional rights and as such, GSL was not entitled to a declaration of any sorts.

The CCJ, presided by Justice Adrian Saunders, Justice David Hayton, Justice Winston Anderson, Justice Maureen Rajnauth-Lee and Justice Denys Barrow, ruled that it could not grant among other things, declarations that the attempt to collect tax by the GRA from GSL was a violation of the company’s constitutional right to protection of property.
In delivering the court’s judgment, Justice Barrow said “there is no basis for this court to intervene to protect the company (GSL) from the consequences of its decision, to not follow the statutory 18 provision for disputing a tax liability.”

He explained that given the outcome, Guyana Stores now finds itself in the position of having to deal with a legally undisputed demand. “It must be left to the company and the Revenue Authority, as well as the State in its greater capacity, to resolve the dispute as to the liability to tax if, indeed, beyond the company’s challenge to the constitutionality of the two per cent minimum tax, there was really a dispute.”

He said GSL must have considered that it could lose the constitutional challenge to the validity of the tax and would in turn leave undisturbed the demand for the taxes. “Broad considerations of justice beyond the strict application of the law,. gave rise during the hearing to considering whether it would be competent and appropriate for this Court to send the challenge to the liability for tax to go through the review and appeal process, since this is the proper, statutory process for resolving a dispute and this process was not engaged,” Justice Barrow stated.

Additionally, the court found too that the GSL could have pursued the statutory procedure for disputing an assessment and do so concurrently with its constitutional challenge but this was not done. In 2000, GSL was a public company controlled by the Government of Guyana which then sold the majority of its shares to the present majority shareholders.

Under the Privatisation Agreement executed by the parties, it is contended, pre-privatisation taxes are to be paid by the Government and these have remained unpaid.
Shortly after privatisation, disagreement regarding taxes arose which is the subject of separate court proceedings. Over the years, the Inland Revenue Department (IRD) of Guyana, a department of the GRA, wrote numerous letters to the GSL informing it of taxes due and payable. It sent updated tax liability statements inviting the company to agree or disagree with stated tax liability amounts and withdrawing or discharging assessments, restating the amount of taxes due and finally demanding payment and warning of an enforcement action.

In a letter dated January 12, 2010 from the Revenue Authority’s ‘Objections and Appeals Section’ the company was told, with reference to a letter it had sent objecting to liability and the requirements for making objections in accordance with Section 78(2) of the Income Tax Act, that the time for doing so and the objection must state precise grounds.
In another letter dated May 13, 2010 the Revenue Authority noted that the company had not sent an objection and it identified to the company what the objection needed to contain and gave until May 27, 2010 for the objection.

Similarly, several letters were written by the GSL to the GRA objecting to the Statements of Assessment and making representations as to its liability. In a letter dated August 4, 2010 the company explained why it had previously submitted unaudited returns and made payments based on financial statements. It also confirmed an earlier statement it had made to the Revenue Authority that should there be any difference in the audited Annual Reports the company would make the correction and/or payment.

The GSL enclosed with that letter copies of Returns along with copies of Receipts of Payments it had made for stated years, these being material missing from the Revenue Authority’s files. The company said it did not receive notices of assessment for any year of assessment between 2001 and 2010, although it received notices that assessments were discharged in respect of certain years.

The GSL said too that it did not receive any notice of assessment for years prior to 2000.
However, by a letter of demand dated April 3, 2012, the GRA made demands for the years of assessment 1985 – 2010. On May 24, 2012, by way of a letter from the GRA’s Commissioner General, a demand for $3,811,346,397 was made. The GSL argued that being forced to pay the demanded $3B in taxes would amount to the compulsory acquisition of its property and in breach of Article 142(2)(a)(i) of the Constitution.

By virtue of the Fiscal Enactments (Amendment) Acts No. 16 of 1994 and 3 of 1996, the company had become liable to pay a two per cent minimum corporation tax. It appears that the company had been paying this tax until it was advised, sometime after it had in February 2012 filed its audited Corporation Tax and Property Tax Returns for the years of assessment 2001 to 2011, that the tax was unlawful and being wrongly applied.
It was as a result of the aforementioned demand by the Revenue Authority, that the GSL brought proceedings in the High Court for constitutional and other relief.

Meanwhile, in arriving at its decision the CCJ examined the constitutionality of the demand for the taxes from the GSL and on the issue of liability to tax, where allegedly no assessment was served on the company and the GRA was incorrectly and unlawfully applying the provision for the payment of the 2 per cent turnover tax.

“This second issue may be identified as the lawfulness of the demand. It is no longer an issue for this court to decide whether a claim for a constitutional violation which does not seek an enforceable order such as a prohibitory or compensatory order is maintainable,” the CCJ stated.

The Attorney General was represented by Solicitor General, Kim Kyte- Thomas, Oneka Archer-Caulder and Judy Stuart-Adonis, while the GRA and the Commissioner General were represented by Ronald Burch-Smith, Mark Waldron and Keoma Griffith. Guyana Stores was represented by Stephen Fraser.