THE ENVIRONMENTAL TAX WAS PROTECTIONIST IN NATURE

May 13, 2014 Features / Columnists, Peeping Tom

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The Guyana Revenue Authority should not be worried about having to find the US$6M to satisfy the Caribbean Court of Justice’s recent judgment which deemed Guyana’s environmental tax as being in violation of the Revised Treaty of Chaguaramas.
The GRA is worried that such a large sum, US$6M, is not provided for in its estimates. But it should not worry. The judgment is not against the GRA. The Order is against the State of Guyana. It has to be paid by the government.
This does not mean that the GRA should be unconcerned about the judgment of the CCJ. In fact the opposite is true: it should be keenly interested in the decision, particularly paragraph 33.
In that particular segment of the ruling, the CCJ argued that it was outside of its jurisdiction to address the issue of whether the importing company had breached the laws of Guyana by its special accounting arrangement. That arrangement saw the Surinamese exporting company bear the cost of freight and insurance for the beverages exported to Guyana.
Guyana had belatedly argued that these arrangements were in breach of Guyana’s local laws. The CCJ did not pronounce definitively on this issue but was of the opinion that the local laws were not breached.
Notwithstanding this non-binding opinion as to a possible breach of local laws, the Guyana Revenue Authority should have its legal personnel explore whether in fact the special accounting arrangement was in breach of the local laws of Guyana. It was this special accounting arrangement that made it possible for the Surinamese company to prove its case and thus secure an Order for the reimbursement of the environmental taxes that it had paid over the years.
If the GRA can successfully establish that this special accounting arrangement did breach Guyana’s laws, it may end up with a judgment that is far higher than the sums that the government now has to reimburse the Surinamese company.
The issue about the tax implications of the judgment is a mute point. The company cannot be asked to pay increased taxes as a result of this judgment. There is no need to seek advice on that score because the company to be reimbursed is incorporated in Suriname and the money goes to that company which absorbed the environmental tax. The reimbursed $US6M does not go to the local subsidiary which imports the products and which under Guyana’s laws has to pay taxes on its local profits.
This problem with the environmental tax is part of the mess that the Ramotar administration inherited from the Jagdeo regime. Guyana was warned for over ten years that the tax was in breach of the RTC but it did nothing to change the laws of Guyana until recently when it tabled legislation to put its house in order. It may have avoided such a harsh judgment had the amendment proposed not been naively rejected by the combined parliamentary opposition.
Why did Guyana not put itself in order, earlier? To understand this issue, one has to understand the class nature of political rule. It is not that the government was stubborn. It was not because of the huge revenues that the environmental tax was bringing in that caused the Guyana government for ten years to ignore COTED’s protestations about the discriminatory nature of this tax. Those were not the reasons. The reason was that this environmental tax was never about the environment. It was protective tax for Guyana’s local beverage industry. From the day it was implemented it gave local beverage producers a G$10 protection against other imported beverages, including beverages from CARICOM. For the government to have removed it would have been asking it to act contrary to the interests of the beverages companies which are part of the capitalist class.
The failure over ten years of the Jagdeo administration to remove this discriminatory tax exposes the class interests which that government represented.
Poor Donald Ramotar now has to remove the tax or amend it to ensure that local manufacturers also pay the tax. But to get this on the law books means that he needs the consent of one or both of the opposition parties. And in the mood they are in they will mostly demand a quid pro quo.
Since the local beverage companies have enjoyed the protection under this environmental tax, the opposition may wish to suggest that the entire tax be abolished and a tax specifically on local beverages be instituted. This seems only fair.
After all, for twenty years the local beverage companies enjoyed a G$10 advantage over its competitors. They should pay back something now. Will the opposition agree to such a tax or will they too see their own interests as being aligned to that of the capitalist class?
(To be continued)

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