Two beverage companies seeking refund of environment tax over seven years

-gov’t to file defence

Two companies have signalled their intention to   file proceedings in the Caribbean Court of Justice (CCJ) seeking a refund of the now repealed environmental tax that was paid here over a seven-year period.

Attorney General Basil Williams told a press conference yesterday that S.M. Jaleel & Company Limited and Guyana Beverages Inc. are seeking special leave to appear as parties before the CCJ for the purpose of     filing an Originating Application claiming relief and re-imbursement against Guyana for the breach of the principles of trade liberalisation and free movement of goods envisioned by the Revised Treaty of Chaguaramas establishing the Caribbean Community.

The Applicants, he said are claiming a refund of the environmental tax imposed on the companies during the period January 1, 2006 to the date of the repeal of the Act in August, 2015 but so far there is no indication of how much money they are asking for.

Basil Williams
Basil Williams

“They are relying on the judgment in the RUDISA Beverages matter in which a similar claim was made”, he said adding that noteworthy is the fact that in the RUDISA matter, it was noted that the Government of Guyana did not lead evidence to show that the tax was transferred. In this fresh proceeding he said, the government intends to lead such evidence.

The Government of Guyana, he informed has served a Request to be heard notice and the matter is scheduled for case management on May 13, 2016 by the CCJ.

Williams was adamant that the two companies are “piggybacking the same way like RUDISA and the amounts obviously, if they were to be successful, would be billions of dollars again”.

He said that the companies have not quantified the amounts but have just given an indication of what they plan to do. “A lot of companies in fact had written me after the RUDISA judgement in this same context, inquiring about the government’s position”, he said.

Williams expressed confidence that the government has a “team of persons we have assembled who could testify on the question of whether the environmental tax was transferred to the consumers” as had been intended by the Act.

Last year, Surinamese company, RUDISA agreed to accept US$6.22M from the award made to it by the CCJ, after negotiations with the government. Guyana had owed US$7.72M based on a 2014 ruling by the CCJ, which had found that an environmental tax imposed by the country was in contravention of the Revised Treaty of Chaguaramas (RTC). 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.

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 was also obliged to file a report with the Court within six months on its compliance with the orders made by the Court. There was no compliance with the orders as the then APNU and AFC opposition had voted against a legal amendment on various grounds.

Imposition

RUDISA and CIDI Distributor had argued that the imposition of the environmental tax by Guyana was a breach of the RTC. They contended 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 was 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 had argued.

According to the ruling, Guyana in response to the submission admitted that the tax was 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 was environmental protection which is a fundamental right under the Constitution of Guyana.

However, the Court observed that the explanation provided by the State, namely its inability 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.

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.

 

 

 

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