Acknowledging a recent ruling in which the Caribbean Court of Justice (CCJ) dismissed an appeal by Guyana Stores Limited (GSL) over the 2% minimum corporation tax applied by the Guyana Revenue Authority (GRA), Caribbean Chemicals, in a similar action, conceded defeat.
Like GSL, Caribbean Chemicals, through its attorney had argued that GRA failed to assess the taxes payable by it in accordance with the provisions of the Income Tax Act in particular, because no notice of assessment had been sent to the Company prior to the demand.
Among other things, it argued also, that the requirement to pay a 2% minimum corporation tax pursuant to section 10A of the Corporation Tax Act, which was introduced by the Fiscal Enactments (Amendment) Act No. 16 of 1994 and 3 of 1996, was unconstitutional.
In the GSL challenge, the CCJ had, however, ruled that GRA’s imposition of the tax was legitimate noting that “the demand remained undisturbed.”
While the GRA had always won its case against GSL right up to the CCJ, it lost against Caribbean Chemicals in the High Court, and thereafter appealed to the Guyana Court of Appeal.
Attorney Oneka Archer-Caulder for the Attorney General against whom the action was also brought, noted that the Revenue Authority’s loss resulted in an erroneous 2008 finding by then Justice Jainarine Singh Jr that the tax was a loan.
Like GSL, Caribbean Chemicals had argued that the purported tax was not truly a tax, but rather a forced loan and as such it amounted to a compulsory acquisition of property.
The CCJ was, however, clear in pointing out in the GSL challenge that the 2% minimum corporation tax was not a loan because the State does not repay the taxpayer nor does the taxpayer have any right to repayment or redemption, which were crucial elements of any loan.
It noted further, that under Section 10A of the Corporation Tax Act, the taxpayer simply gets a credit, if and when the stated conditions are met, and may then apply that credit in reduction of its tax liability but the taxpayer is never entitled to repayment.Since the local appellate court would be bound by the decision of the CCJ, Archer-Caulder was successful in her application last Friday before the Court of Appeal to have Justice Singh’s order of September 19, 2008 be vacated.
Acknowledging the hierarchical structure of the courts, counsel for Caribbean Chemicals (the respondent), Shantel Scott-Lall conceded the ruling of the CCJ in the GSL challenge of the corporation tax being legitimately applied.
The case was thereafter brought to an end. In this action, GRA was represented by attorney Joy Persaud.
The CCJ ruling saw GRA winning $3.8b against Guyana Stores.
After receiving a demand dated May 2012 from the then Commissioner General, Khurshid Sattaur for the sum of $3,811,346,397 in unpaid taxes GSL instituted legal proceedings.
Like GSL, Caribbean Chemicals contended that being forced to pay the demanded taxes in circumstances where there was no proper assessment would amount to the compulsory acquisition of GSL property in breach of Article 142(2)(a)(i) of the Constitution and that the Corporation Tax Act and its 2% minimum corporation tax, was not truly a tax but a forced loan and as such amounted to a compulsory acquisition of property.
It argued too, that the imposition of the tax where no corporation tax is payable for ‘loss years’ was made in “bad faith, unreasonable, arbitrary, capricious, whimsical, unconstitutional, null and void and in contravention of Articles 39, 40 and 142 of the Constitution”; that it was only where corporation tax was payable that the 2% minimum tax may be imposed, and in a ‘loss year’ no tax is payable so the 2% minimum tax may not be imposed; that the proper interpretation of the Corporation Tax Act excluded the imposition of any taxes in years where the company is unprofitable; and that the 2% minimum tax was disproportionate, unconstitutional, null and void, insofar as it violates the constitutional requirement of proportionality.
The CCJ, however, disagreed with these submissions made by GSL and found that there had been no violation of its constitutional right to protection from deprivation of property.
On the issue of assessment notice, which was also raised by Chemical Chemicals and dealt with by the CCJ in the GSL appeal, the court held that there was no statutory form of notice prescribed for conveying an assessment to a taxpayer. Additionally after reviewing the correspondence between the Company and GRA, the Court concluded that there was no sudden and unannounced imposition of and demand for taxes from GRA and, it appeared, that there was no arbitrary assessment.
It was noted that the documents produced in evidence included letters, statements of assessment and a demand notice by which the Revenue Authority duly informed the Company of the amount in which it had been assessed.
“The Company had been filing tax returns and had previously accepted the liability to pay the 2% minimum tax and the Company was notified of the tax assessed for each year. It was, therefore, perfectly open to the Company to notify the Commissioner of its objection, as the Act provides,” the court maintained.