Guyana ordered by CCJ to repay $1.2B in environment tax to Suriname company

The Government of Guyana has been ordered by the Caribbean Court of Justice (CCJ) to pay Suriname company Rudisa Beverages some US$6, 047,244.47 (G$1.2B) which had been collected in an environmental tax that contravenes the Revised Treaty of Chaguaramas (RTC).

Guyana was also ordered to take the necessary legal or other measures to prevent the collection of the environmental tax on goods of Caricom origin. According to the ruling, the country is also obliged to file a report with the Court within six months on its compliance with the orders made by the Court.

The judgment, issued in the court’s original jurisdiction, could lead to similar claims against the government from Caricom companies on which the longstanding tax was levied. It was also made clear in the judgment that the political gridlock here will not absolve Guyana of liability in actions of this type. Guyana had explained before the court that it had attempted to rectify the tax but that the measure failed in Parliament.

Rudisa and CIDI Distributor, which distributes the beverages in Guyana, had filed an application with the CCJ alleging that the imposition of the environmental tax by Guyana was a breach of the RTC. They argued that the tax was inconsistent with Caricom trade policy set out in Articles 78, 79, 87 and 90 of the RTC which provide for the free movement of goods and prohibitions on the imposition of import duties on Caricom goods. The two sought a declaration that the Guyana Customs Act violates either Article 87 or 90 of the RTC; an order compelling the State to amend or repeal the legislation to eliminate its discriminatory effect; an order restraining the imposition and collection of the tax and damages.

The companies had noted that the imposed tax on their goods raised the cost price on each imported container by G$10. No similar tax is imposed on local producers of non -returnable beverage containers and, by the definition of “Import Duties” laid down in the RTC, the levy must be regarded as an import duty, they argued.

According to the ruling, Guyana in response to the submission admitted that the tax is inconsistent with its obligations under the RTC but noted that the Government had proposed legislation to rectify the discriminatory effect of the environmental tax but the proposed amendment was rejected by the National Assembly. The Government Guyana also submitted that the aim of the legislation is environmental protection which is a fundamental right under the Constitution of Guyana.

However, the Court observed that the explanation provided by the State, namely itsinability to pass the necessary legislative amendment to the Customs Act, did not absolve it from liability for the breach.

“The State was indivisible for the purposes of liability and had an overarching responsibility to honour treaty obligations,” the court ruled, while taking notice of the need to strike a balance between environmental protection and economic development.

It emphasised that Article 65 of the RTC does not create an exception to the trade policy spelt out in Chapter Five, the purpose of which is to create “a level playing field for all CSME products.” The Court found that Guyana was liable to the Claimants.

By way of relief, the Court declared that the tax was inconsistent with the RTC, the founding treaty of Caricom, and ordered the State to take the necessary action to ensure that it was not applied to goods of Community origin. The Court also ordered that the claimants were entitled to a repayment of the tax which had been paid by them and collected by Guyana.

According to the ruling, the Court’s approach on the issue of re-imbursement was informed by Société Comateb v Directeur Général de Douanes et Droits Indirects 1, namely that where a tax has been improperly collected in breach of a treaty obligation, it must be repaid unless it can be shown that the tax was passed onto to the consumer or a third party. It said that there was no evidence to suggest that the tax was passed on. The documentary evidence as well as the testimony of the Claimants’ witnesses demonstrated that the tax was absorbed by the Claimants in order to maintain their competitive edge in the Guyana market. The Court therefore ordered that the Claimants be repaid the sum of US$6,047,244.47 together with such further tax paid from 25th October 2013 to the date of the judgment.

The ruling detailed that the effect of the environmental tax on the companies’ beverages was first raised with the Caricom Council on Economic Trade and Development (COTED) by the Government of Suriname in a series of meetings spanning the period 2001 – 2012. COTED concluded that in so far as it applied to Caricom goods the levy was in breach of the RTC. Guyana, in turn, committed itself to take the necessary action to eliminate the discriminatory effect of the environmental tax. Thus in 2013, the Government brought legislation to the National Assembly to amend the Customs Act but the proposal was rejected.

The combined opposition parties, APNU and AFC had last year used their one-seat majority to block Government’s amendments to the Customs Act following the administration’s refusal to postpone the consideration of the Customs (Amendments) Bill 2013 in order to conclude promised consultations with the private sector.

The bill, which was read for the first time on January 10 2013, had sought to lower the rate of the Environmental Tax charged on beverage containers while widening the range of bottles, cans and other receptacles that are subject to the tax. Had the amendment been passed, it would have removed cardboard boxes from the list of taxable items under the Act. And while it proposed to lower the tax levied on some items imported, it would have also levied a new tax on local manufacturers that are exempted under the current legislation.

Speaker after speaker on the government side had emphasised the importance of the passage of the bill in bringing the country in conformity with its many regional and international obligations, while also potentially protecting it from losing money in the recently concluded cases. However, both APNU and the AFC argued that it was the government that had placed the country in jeopardy by passing laws that do not conform to international standards. Opposition speakers had also charged that although the current PPP/C administration no longer has the majority in parliament, it still wants to rush through bills without holding proper consultations.

The bill, which was effectively killed by the non-support of the opposition parties, had stated that the Environmental Tax would have been levied on every unit of metal, plastic or glass container of any alcoholic or non-alcoholic beverage imported into the country and every unit of resin, metal, plastic or glass container to be used in the manufacture in Guyana of any alcoholic or non-alcoholic beverage.

Around the Web