Five points to note in the CCJ’s decisions in the Environmental Tax case

May 18, 2017 Letters

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Dear Editor,
The Caribbean Court of Justice (CCJ) decisions in the claimants, S.M. Jaleel(SMJ)/Guyana Beverages Inc.(GBI), case against the Government of Guyana for reimbursement of the discriminatory environmental tax on non-returnable containers utilized by foreign beverage distributors (with local beverage distributors excepted) are a rather mixed bag. On one of the two major issues, it found favour with the Government of Guyana’s ‘laches defence’ that there was an excessive (prescriptive) lapse of time, from the 1 January 2006 coming into being of the Revised Treaty of Chaguaramas (RTC) before the claimants on 7 March 2016 instituted restitution proceedings against the Government of Guyana.
Because of the time limitation factor, the reimbursement liability of the Government of Guyana was deemed by the CCJ to be only from 7 March 2011 to 7 August 2015 (the latter date being when Guyana eventually removed the tax on foreign beverage distributors).As a result, the claimants were not granted reimbursement from their desired longer period of 1January 2006 to 7 August 2015 because of their not being sufficiently diligent and timely in challenging the tax
With respect to the other major issue, that the claimants might have passed-on the environmental tax to the Guyanese consumers and so would be ‘unjustly enriched’ if they were to receive restitutionary compensation in the form of refund of the environmental tax they had paid to the Government, the CCJ ruled “that unjust enrichment precludes any defence of passing-on being available to Guyana in the circumstances of this case”.
It is the reasoning of the CCJ on this particular issue will be the focus of this missive, since the CCJ seemed unduly concerned not to reverse the position in favour of restitution it had reached in the previous Rudisa case, despite the argumentation and evidence produced by the defendant Guyana Government in this subsequent SMJ/GBI case. There are a number of troubling aspects:
First, the CCJ did not accept, or even seem to consider, the evidence presented to it on passing on. It should be noted that, In the previous Rudisa case, although the Guyana Government had argued that it should not have to reimburse the claimants the environmental tax it had collected since, if it did, the claimants would be unjustly enriched at the expense of their customers, it nevertheless failed to produce any research data and other information in support of its passing-on case. In this regard, the CCJ, as part of its decision making in 2014, stated that “this (unjust enrichment argument) would have been an attractive submission if Guyana had been able to produce evidence to show that the tax had in fact been passed on to consumers and that to award reimbursement will unjustly enrich the claimants”.
In the case of the recent SMJ/GBI case, the Guyana Government did produce the evidence to counter the CCJ argument that “trying to identify what particular costs have or have not been passed on creates enormous evidential difficulties due to the interactions of various and complex considerations affecting commercial strategy and motivations”. The Guyana Government in fact showed clearly, via Exhibit 12, that, in the annual Financial Statements of GBI, the Environmental Tax is stated as a part of “Cost of Sales” which is the basis of its pricing strategy. Having been presented with the evidence, the CCJ retreated into the rather dubious position of stating that the tax needed to be itemized on the customer’s bills, a la VAT, in order to show that the tax was an extra cost passed on by the trader, GBI.
Second, the CCJ surprisingly went even further to state that the price paid by the consumer for a beverage in a competitive economic environment amounted to a private contractual arrangement between the trader and the customer and therefore there was no inherent enrichment as a result of the consumer paying the going price that enables the trader to cover all its costs. The CCJ reasoned that “Guyana cannot just thank the trader for its efforts and then expropriate by way of set off whatever amount of the tax cost that the trader had managed to cover.
To permit this would be to allow Guyana to unjustly enrich itself by exploiting the traders’ legitimate efforts and by making an illegal profit out of legislation known to be unlawful”. This view of the CCJ is tantamount to co-opting the consumer into the role of an ally of the trader in the latter’s dispute with the Government carrying the burden of proof to great extremes.
Third, the CCJ seems to rule out the use of econometrics for determining the ‘balance of probability’ that a tax was passed on when it cited a particular ruling of the European Court of Justice (ECJ) that “a Member State may resist repayment to the trader of a charge levied in breach of Community law only where it is established that the charge has been borne in its entirety (my emphasis) by another person….” Here again, by its all or nothing approach, the CCJ is treading on dangerous ground and is therefore dismissive of the concept of ‘balance of probability’ (presumably even where, as with many examples particularly in the USA literature, an analyst uses econometrics to compare price cum quantity data before the advent of a tax, with the outcome showing the exact percentage of the tax that was passed on after its imposition).
Fourth, while the CCJ was at pains to state that, in all of the ECJ passing on cases, the ECJ was focused on national legislation that made specific provision for a passing on defence in respect of national taxes or charges allegedly levied in breach of EU law’ and that “Guyana has no such national legislation for detailed examination but unjust enrichment principles underlying any defence of passing on may be considered to be part of Guyanese law”, it did not indicate whether any such examination was done by its justices of the Guyana legal situation. Instead, the CCJ digressed into a lenghty discussion of the inviolateability and non discriminatory imperatives of community trade law (including charges and duties related thereto among member countries) under the Caribbean’s RTC. At the end of it all, the reader is not sure whether the absence of legislation in Guyana’s case was a significant contributory factor to its basic rejection of its passing on defence..
Fifth, the CCJ is entirely silent with respect to the fact that the SMJ/GBI claimant, in seeking to compensate for the discriminatory environmental tax imposed on it by the Government of Guyana in violation of RTC laws, admitted to unilaterally engaging (ie taking redress without CARICOM’s express approval)) in a commercial policy of discounting the prices of its its beverages sold on the Guyanese market, thus flagrantly violating other community laws relating to dumping.
That should have been enough for the CCJ to dismiss the SMJ/GBI claim.
Dr. Maurice Odle

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