In keeping with several recent rulings declaring the method used by the Guyana Revenue Authority (GRA) to recoup taxes from commercial entities as being correct, the Guyana Court of Appeal on Tuesday ruled that 2J’s General Store remains liable for the more than $9 million in taxes being claimed from it.
And as it had ruled just last week in the case of GRA v Grand Coastal Inn, the court had cause to again state that the procedure used by 2J’s in challenging the taxes to be paid contravessned statutory stipulations.
Allowing the Authority’s appeal against the decision of former acting Chief Justice Ian Chang, who had previously ruled in favour of the general store, the appellate court awarded the GRA costs in the sum of $250,000, which has to be paid by 2J’s.
Among other things, the court also ruled that the store ought to have first availed itself of the statutory procedures contained in the Income Tax Act for challenging its tax liability by the GRA, before going to the court.
Section 78 of the Act sets out the procedure to be used by a person dissatisfied with an assessment to apply to the Commissioner General of the Authority to have it reviewed and revised.
Disputing liability for $9,419,181 in additional taxes on understated income from 2004 to 2007, together with a 10% penalty, husband and wife Leslie and June Johnson, the proprietors of 2J’s, bypassed processes laid down by statute and moved to the court.
They sought prerogative orders of prohibition and certiorari, which were granted by Justice Chang to quash the decision of the Commissioner General requiring them to pay additional taxes and prohibiting him from imposing any additional income tax for the disputed years.
Justice Chang had granted the nisi orders on the basis that the decision of the Commissioner General as to the additional tax liability owed by the Johnsons was unreasonable, in excess of jurisdiction, and made in breach of the rules of natural justice.
It was from this ruling that the GRA appealed as it argued that Justice Chang failed to properly assess the evidence, or apply the relevant laws, and misdirected himself on several points of law.
For their part, the Johnsons, who were the respondents, based their case mainly on two grounds—that the method of assessment adopted by the GRA to arrive at the adjusted tax liability was unreasonable and unknown to accounting practices; and that the procedure by which the investigation was conducted was in breach of natural justice, in that they were denied a fair hearing “or any hearing at all.”
In granting the orders sought by the Johnsons, Justice Chang had ruled that the assessment done by the GRA was unlawful since it was raised by an auditor and not the Commissioner General himself.
In the alternative, the former Chief Justice held that even if the assessment was that of the Commissioner General, he erred procedurally by failing to give the Johnsons a hearing before making the determination.
Referencing case law coupled with legislative authorities, the Court of Appeal found that the Authority’s assessment of the Johnsons’ tax liability was lawful, while noting that Justice Chang’s finding that it was not was both “legally and evidentially unsustainable.”
Even before examining the law on this issue, the court said it would be counter-intuitive that the Legislature would provide a scheme in which the functions of auditing, investigating, interviewing and assessing taxpayers must only be performed personally by the Commissioner General himself.
The respondents had taken issue with the assessment of their taxes having been done by an auditor of the GRA and not the Commissioner General himself, whom they claimed would have abdicated his statutory duty.
Citing sections 22(3) and 22(6) of the Revenue Authority Act, the Appeal Court noted that the Commissioner General had the power to delegate duties to auditors under his employ.
Those sections indicate that “staff thereby appointed shall exercise such functions and perform such duties as are conferred upon them by the laws specified by the Minister under Section 10 or as delegated or assigned to them by the Commissioner General.”
To this end, the court said that in tandem with the scheme, a blanket power was given to the Commissioner General to delegate any of his functions, including any that are specified in other laws.
Section 8 of the Act provides, “the Commissioner General may delegate to any officer of the Authority such of his duties as he deems fit.”
The court thus surmised from the totality of these provisions that it is pellucid “that the process of revenue collection in Guyana is not a one-man show.”
It further went on to say that while taxation statutes do repose the various functions and powers in the Commissioner General, it is obviously understood that he cannot himself perform them all, for expressed power is given to him to delegate such of his duties as he deems fit.
It was against this backdrop that the court concluded that Justice Chang’s reasoning that the Commissioner was personally required to determine the chargeable income of the Johnsons was “unsupportable.”
As regards the Johnsons’ contention of not being given a fair hearing, the court referenced the back and forth correspondence between the parties on their liability to the Authority.
Also noted was the fact that they not only replied to letters and telephone calls, but had even been invited, and attended meetings at the Authority’s headquarters to discuss their taxes.
Relying on a number of cases and the facts presented in the case, the court said that there was no doubt that the Johnsons were afforded multiple opportunities to defend their self-assessment during the investigation, which the GRA had launched into their taxes and of which they were fully aware.
According to court documents, the Authority had also granted repeated requests to the Johnsons for “extra time.”
Citing the case of Guyana Stores Ltd v the Attorney General, which was heard by the Caribbean Court of Justice (CCJ) earlier this year, the appellate court highlighted the words of Justice Barrow.
He said “there was no sudden and unheralded imposition of and demand for taxes from the Revenue Authority and, it appears, it was no arbitrary assessment.” That case, too, dealt with taxes, which Guyana Stores owed to the GRA to the tune of $3.8 billion.
Bypass not permissible
Meanwhile, as regards the procedure used by the Johnsons to mount their claim, the appellate court has had cause to reemphasise the need for aggrieved taxpayers to utilise all available statutory forums before approaching the courts.
To this end, the court referenced Section 78 of the Income Tax Act, which sets out the procedure by which persons dissatisfied with an assessment may apply to the Commissioner-General for it to be reviewed or revised.
In accordance with the section, another round of inquiries into the person’s income will then be conducted during which the Commissioner may request further particulars, inclusive of books and other documents, and may even summon other persons to give evidence on oath regarding the assessments.
The judgment noted that this is a comprehensive process designed to produce fair and accurate results. Section 78(5) notes that at the end of that process, the Commissioner General can vary the amount of the assessment, which would bring the objection to an end.
If no agreement is reached, however, the section goes on to inform that either party has two further reviews—first an appeal to the Board of Review and then to a judge in chambers.
It was within this context that the GRA submitted that because the statute provides such a comprehensive objections and appeals procedure, affording the taxpayer opportunities to contest issues of fact and law concerning assessments, the Johnsons ought to have availed themselves of it before seeking judicial review via the court.
“It was therefore not permissible for the applicant to attempt to bypass the statutory tribunal by applying for a precognitive writ,” the court declared.
The ruling reminded that in the Guyana Stores case, the CCJ had “strong words” for invoking the constitutional jurisdiction of the court when the crux of the dispute related to liability as to quantum of taxes payable. The Court of Appeal also referenced its own pronouncement in the Grand Coastal case, where it said, “Stripped of its prerogative remedies costume, in reality [that case] is concerned with a disagreement with the additional… tax assessed by the Commissioner, which should be dispatched with all due haste.”
The court noted, however, that “this is not to say that prerogative remedies are never available, only that the circumstances must be exceptional before they can be properly invoked.”
In allowing the GRA’s appeal, the court thus discharged the orders nisi of prohibition and certiorari which the Johnsons had been granted by Justice Chang and ordered them thereafter to pay to the Authority court costs in the sum of $250,000.
Additionally, they remain liable to the GRA for the $9,419,181 owed in taxes.
The appeal was heard by Justices of Appeal Arif Bulkan, Dawn Gregory and Rishi Persaud. The ruling was read by Justice Bulkan.
The GRA was represented by attorney Joy Persaud, while 2J’s was represented by attorney Robin Hunte.
Having also won its appeal against the Grand Coastal Inn, the GRA is set to be paid the more than $31 million, which the hotel owes it in value added taxes. The court, in its ruling in that case, noted that not only will Grand Coastal now have to pay the full sum of $31,290,473 which it owes in taxes for 2007-2008, but all consequential interest imposed by the VAT Act.
In the case of Guyana Stores, which lost its constitutional challenge to the 2% minimum corporation tax, it is liable to the GRA for the payment of $3,811,346,397 in unpaid taxes.