Guyana Stores must pay $3.8B to GRA

Mar 06, 2018 News

…after CCJ upholds Corporation Tax case

The Guyana Revenue Authority (GRA) has successfully won an appeal before the Caribbean Court of Justice (CCJ) in a matter of Guyana Stores Limited (GSL).

Also named in the case appealed to that court was the Attorney General, and GRA’s Commissioner General.

The matter involved a constitutional challenge to the two percent minimum Corporation Tax under the Fiscal Enactments (Amendment) Acts. No. 16 of 1994 and 3 of 1996.

The company had received a demand dated May 2012 from the Commissioner General of GRA for the sum of $3,811,346,397.

GSL instituted proceedings in the courts of Guyana, and the matter was subsequently appealed to the CCJ after rulings in favour of GRA.

The CCJ has ruled that the minimum Corporation Tax as enacted by the National Assembly was not a forced loan, as argued by the company.

“The court has upheld the GRA’s submissions that the minimum corporation tax is constitutionally valid. The CCJ also ruled that the company should not be permitted to invoke the constitutional jurisdiction of the courts by arguing that an alleged misapplication of a law is unconstitutional.

The CCJ stated that the Income Tax Act provides a specialized procedure for challenging assessments and the company ought to have utilized that procedure.”

GRA, in a statement, said that the decision is a victory for the authority as many taxpayers attempt to avoid the specialized procedure under the Act in order to delay and evade the payment of tax.

GRA was represented by attorneys-at-law, Ronald Burch-Smith, Mark Waldron and Keoma Griffith.

Kim Kyte-Thomas, Oneka Archer-Caulder and Judy Stuart-Adonis represented the Attorney General of Guyana. Attorney-at-law Stephen Fraser appeared for GSL.

GSL argued that the tax authority failed to assess the taxes payable by the company in accordance with the provisions of the Income Tax Act (“the Act”), in particular, because no notice of assessment had been sent to the company prior to the demand. The company also argued 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) Acts No. 16 of 1994 and 3 of 1996, was unconstitutional.
In a claim filed in the High Court of Guyana, the company sought, among other things, declarations that the attempt to collect the demanded taxes was in violation of its constitutional right to protection of property and that the Company was not liable to be assessed or reassessed except in accordance with the proper procedures.

Acting Chief Justice Ian Chang, struck out the entire claim, principally on the ground that a constitutional law claim for purely declaratory relief with no consequential and executory orders could not be maintained.

He said that the only enforceable orders sought by the Company were for the payment of general compensatory damages and punitive damages but that the claim did not allege any basis for awarding damages so that the claim would have to be dismissed.

The Court of Appeal disagreed with the learned CJ (ag) that purely declaratory reliefs were not permissible under the Constitution.

However, the court upheld the decision to strike out the claim because, in the court’s opinion, looking at the merits of the company’s case, there had been no violation of the company’s constitutional rights as the imposition of taxes was not a compulsory acquisition of property proscribed by Article 142 of the Constitution.

There were two main issues argued before the CCJ. The first was that of the constitutionality of the demand. The company submitted that to be forced to pay the demanded taxes in circumstances where there was no proper assessment would amount to the compulsory acquisition of its property in breach of Article 142(2)(a)(i) of the Constitution.

The CCJ did not agree with the submissions and found that there had been no violation of the company’s constitutional right to protection from deprivation of property.
In relation to the submission that the 2% minimum tax was to be collected only in a year of profit, the CCJ held that this was not a constitutional law issue but one of a “straight question of statutory interpretation.”

The second issue for the Court’s consideration was the lawfulness of the demand, that is, the liability to pay taxes where allegedly (a) no assessment was served on the company and (b) the Revenue Authority has been incorrectly and unlawfully applying the provision for the payment of the 2% turnover tax.

In considering this issue, the Court firstly held that there was no statutory form of notice prescribed for conveying an assessment to a taxpayer. After reviewing the correspondence between the Company and the Revenue Authority, the Court concluded that there was no sudden and unheralded imposition of and demand for taxes from the Revenue Authority and, it appeared, that there was no arbitrary assessment.

The appeal was dismissed with costs to the respondents.