The Guyana Revenue Authority (GRA) says it opted for a tax settlement with DDL as there had been no satisfactory outcome to a fourteen-year dispute and the company was likely to take the matter to the Caribbean Court of Justice (CCJ).
Yesterday in a press release, the GRA was responding to Opposition Leader Bharrat Jagdeo’s description on Saturday of the deal with Demerara Distillers Limited (DDL) as “scandalous”.
“The GRA finds Mr. Jagdeo’s objection to its efforts to have an amicable relationship with taxpayers, including those in the business community troubling. The tone of his views as reported in the newspapers present taxpayers as if they are to be enemies of the State,” the agency said in the release.
GRA further contends that Jagdeo is attempting to reconstruct the 14 years of failure by his government to bring this matter to an end, a matter that has engaged the attention of the Courts since 2002 at great cost to the national coffers and tax payers.
“After almost 14 years with no satisfactory outcome in sight, the GRA exercised its right to settlement in order to avoid more years of litigation and the consequent loss to the national coffers as DDL was likely to take the matter to the CCJ. That settlement was calculated based on what the law permits,” the agency said.
In a release last week DDL announced that an “amicable settlement” was reached with GRA in a longstanding dispute over Consumption Tax which will see it paying $1.5b to GRA to settle all claims up to March 9, 2016. The settlement follows a legal battle between DDL and GRA dating back to 2002 and heightened by a Consumption Tax assessment against DDL by then Commissioner General Khurshid Sattaur in January, 2009, in the sum of $5.3b.
Jagdeo had said on Saturday that “the settlement sends the wrong message to the business community; that a company can unilaterally decide to stop paying taxes, while other companies comply with the law, take the matter to court and drag it out until a sympathetic government comes to power and settles its debts to the State.”
In responding to Jagdeo’s concerns, the GRA noted his complaint that the settlement was made public by DDL stating that “the GRA does not encourage discussions about taxpayers’ issues or information in the public domain.”
The agency further notes that “it is disappointing that Mr. Jagdeo, who ought to have known better, would seek to expose the business of a taxpayer as well as attempt to have information on other taxpayers disclosed, even though he knows that these are violations of the oath of secrecy that the GRA is mandated to protect. The GRA also finds it astonishing that, given the history of violations of taxpayers’ privacy that occurred under his government’s stewardship, which Guyanese found repugnant, that he would want to encourage the GRA to continue to operate along those unacceptable lines.”
The former president had said in his statement that the sum owed by DDL, according to the GRA assessment, was $5.392 billion from 2001 to 2006. “This settlement was only arrived at on March 9, 2016. It means that DDL had use of this money for 15 years,” Jagdeo said. “If one were to calculate interest on this sum, at a rate of 10 per cent per annum, using only the past 10 years, the liability would amount to $10.6 billion. The GRA assessment of $5.392B was based on a formula handed down by the Courts, but yet DDL refused to pay. This settlement also writes off all possible liabilities in respect of Excise Tax up to March 9, 2016; so if the same situation obtains with regard to the Excise Tax, between 2006 and 2016, then the liabilities would run into tens of billions more”, Jagdeo said.
However, the GRA contends that Jagdeo’s “formula upon which he based his speculations about the consequences of the negotiated outcome shows that the government actually gained a profit of G$231 million under the scenario he proffered. Mr. Jagdeo is fully aware that once a debt owed exceeds one year, its value must be discounted for every year it remains uncollected. During that 15-year period of litigation and based on the interest rate of 10 percent that he chose, his G$5.3 billion would have been worth G$1.3 billion to the government after 15 years.”
Jagdeo had also said that the settlement opened the door for other companies “to seek refunds on taxes paid. There have already been reports in the private sector of other major companies consulting lawyers about this possibility. Management officials from a major local alcohol and beverage producing company have made it clear, in the past when I was President, that the company would be seeking a refund depending on the outcome of the DDL matter.”
He said that if the beverage company mentioned above, “were to conservatively use DDL’s case to advance a call for a refund of taxes it paid this could result in the treasury balance being further diminished. Extrapolating, the refund for one company on consumption tax alone could total some $7.6 billion up to 2006, inclusive of interest.”
Jagdeo said that during his first meeting with President David Granger following last year’s general elections he had offered to have the current Attorney-General briefed by his predecessor Anil Nandlall about five major cases involving billions of dollars in taxes lawfully due to the State, including the DDL matter. The offer, he said, which was made because the People’s Progressive Party/Civic believes we must safeguard the state’s revenue sources and this is not a matter that ought to be contaminated by politics, was rejected.
He called on the government to disclose whether an assessment was done of DDL’s liabilities in respect of Excise Tax for the period 2006 to 2016 and what was the sum of that liability. According to the statement Jagdeo also wants government to reveal who negotiated the settlement, whether it was legal and if it had been approved by Cabinet or the Board of the GRA. In addition, he said, the principle on which the sum of $1.5 billion was arrived at should be disclosed as well as how many other deals have been concluded or are being negotiated.
