The Berbice Bridge Company Inc registered a 57.3% increase in profitability for 2011 but chartered accountant Christopher Ram has raised concerns about the validity of this position considering the question of taxes and he also noted that the annual returns failed to reflect a large sale of shares to the Queens Atlantic Group.
Writing on his www.chrisram.net blog, Ram said the financial performance of the company BBCI in 2011, the sixth year of a 21-year concession period, improved significantly over 2010 with a 57.3 profit rise. This, he said, was however not without serious question. He said that the annual return for the company, incorporated in 2005, was filed earlier this week with the Registrar of Companies.
Turnover for the year of $1,193.4 million, was made up entirely of toll charges, an increase of 7% over 2010, ranged against a 17% increase in 2010 over 2009. With other income of $7.7 million mainly from insurance claims, total income for 2011 of $1,201 million was its highest ever, a 5.4% appreciation over 2010.
“The company demonstrated good expenditure management with expenditure increasing only marginally from $287 million to $291 million. While wages and salaries increased by 26.8%, the absolute amount as a percentage of overall expenses was fairly modest. It did not therefore unduly affect profitability”, Ram said.
Total expenses from total income gives a profit before tax of $216.8 million, up from $137.3 million or 57.3%, he said, adding that it then becomes murky as the question of taxes is completely ignored.
“It is not clear whether the corporation tax exemption on which the company is relying is by virtue of the Berbice River Bridge Act which provides for ‘corporation tax, income tax and withholding tax’ exemptions for the duration of the Concession Agreement. Or whether it is the Income Tax (In Aid of Industry) Act which requires a tax exemption letter from the Minister of Finance. The Financial Administration and Audit Act provides that tax remissions, waivers and concessions are only valid if expressly provided for in a tax Act or subsidiary legislation. The Bridge Act is not a tax Act and it seems that concessions purported to be granted under that Act are invalid.
“But the Income Tax (In Aid of Industry) Act seems hardly any more helpful. The Act sets specific criteria which any successful applicant must satisfy including activities that ‘demonstrably create new employment in infrastructure development…’The Bridge, socially and economically beneficial as it is, cannot be said to have demonstrably created new employment. If anything, it has displaced employment. It can also be argued that the construction of the Bridge was infrastructure development but its operation is not”, he said.
This raises the question of whether the tax liability has been properly addressed in the accounts.
The chartered accountant said it was even more ridiculous that the financial
statements of the company actually claim that the company is exempt from property tax when that is not the case.
Ram asserted “The concession under the Berbice Bridge Act violates the Fiscal
Administration and Audit Act and in any case does not exempt the company from Property Tax. And in respect of the Income Tax (In Aid of Industry) Act, the Bridge activity does not seem to satisfy the criteria under section 2 of the Act.”
Turning to the balance sheet in which the principal asset is the Bridge which is stated at $8,783 million, Ram said cash and bank at December 31, 2011 was $163 million, a much more comfortable level than the $24 million one year earlier. He noted that the main providers of the finance are the investors in ordinary share capital of $400 million, preference shares of $950 million and various loans amounting to $7,275 million. The holders of the ordinary shares are NIS, New GPC, Queens Atlantic and Secure International Finance Company each having $80 million each, and Hand-in-Hand and Demerara Contractors each holding $40 million.
However, he said that during 2011, Clico’s Liquidator sold to Queens Atlantic (the Ramroop Group) the 80 million ordinary shares previously held by Clico.
“Outside of any role of the Clico’s liquidator is the shocking failure by BBCI to disclose in the 2011 Annual Return, the fact of the transfer. Even if, charitably, the “omission” was not deliberate, it would surely rank as reckless incompetence that an improper return was submitted”, Ram charged.
He said there are other grounds for suspicion as it relates to the preference
shareholders. The holders of those shares are government holding company NICIL, the company of which Winston Brassington is the CEO.
Brassington was also the company secretary of BBCI and in that capacity signed the 2010 annual return. Ram said Brassington “inexplicably failed to report the preference shares or the identity of the owners – the Government – of those shares.
In other words, for the public records …they did not exist. And the Government assumed anonymity in the financial statements as well, the holder of the preference shares being described simply as “an investor”. Mr. Brassington is the Chairman of Guyana Power and Light Inc. That company has preference shareholders and has reported properly the information the annual return requires about preference shares”, Ram said.
He said his next installment will expose how a shareholding scheme has operated against Guyanese taxpayers among other things.
The crossing tariff for the Berbice Bridge which commuters have complained about reflects a built-in rate of return for the investors in the structure.