The Guyana Revenue Authority (GRA) says it is conducting an audit to determine and quantify the outstanding tax liability of Demerara Distillers Limited (DDL), adding that it was empowered by a recent court decision to re-assess the company regarding Consumption Tax for the years 2001–2006.
In a statement issued yesterday, the revenue body said it was perturbed at a press statement issued by the company on Thursday which it said did not accurately reflect the true implications of the decision of the Court of Appeal, which was issued recently.
The current assessment being done could result in additional tax liability for DDL, the statement said.
The GRA stated that the effect of the ruling by the Court of Appeal is that the Consumption Tax liability of the company is by no means extinguished.
DDL in a statement released to the media on Thursday said that it was co-operating with the GRA which asked the company to produce for inspection its books, accounts and documents for the period January to December 2006 pursuant to Section 17 (1) and (2) of the Consumption Act.
It disclosed too that GRA officers had visited its Plantation Diamond location and had requested the documentation.
However it said the request came closely on the heels of the recent Guyana Court of Appeal ruling which the company said was in its favour. The matter dealt with the calculation of the Consumption Tax (C-Tax).
However in response to the company’s claim the GRA noted that according to the court, the Commissioner–General is mandated under the act to compute the tax base on a national open market price which would include expenses incurred after production, such as commissions, sales costs and expenses and that notional price becomes the selling price for the calculation of the tax.
In a recap of the original ruling which was handed down by Justice Dawn Gregory-Barnes on February 1, 2005, DDL in its statement on Thursday said it had asked the court to rule that it was being taxed twice by the GRA with respect to C-Tax on alcohol products manufactured at Diamond and sold on the local market. It further stated that the amounts of C-Tax claimed by the GRA were based on a valuation of the goods, which was based on a wholesale price list of DDL.
The company had argued that the wholesale price list already included the C-Tax on the products as well as the cost of delivery by DDL to the customer and therefore it had asked that the tax be based on the valuation of the products when held in its Customs bonds. The case covered manufacturing activity between January 2001 and September 2002.
DDL said Justice Gregory-Barnes in her written judgement found that the inclusion by the GRA in the taxable value of the tax itself (50%) and the cost of delivery of the goods was unlawful and not in keeping with the provision of Chapter 80:02 of the Consumption Tax Act. That Act has since been replaced by the Value-Added Tax legislation.
The GRA which was represented by Attorney General Doodnauth Singh (SC), Ashton Chase SC and Hissaun Yassin–Nandlall contended that the court also concluded that instead of computing the tax in accordance with the law, the commissioner general relied on DDL’s actual selling price of the products which was
“wholly erroneous.”
“The Court of Appeal roundly criticized DDL for this practice which included their expenses,” the GRA said.
According to the GRA the court also noted that in accordance with the provisions of the Consumption Tax Act the onus of determining the notional selling price is a power vested in the Commissioner General and not the company.
It further said that the court dismissed the cross appeal filed by DDL, emphasizing that official pronouncements on a statute does not give rise to a legitimate expectation.
For the disputed period, DDL said that it paid the C-Tax on a wholesale valuation of the goods based on its cost of production plus a 15% mark-up in keeping with a previous statement by President Bharrat Jagdeo at a Guyana Manufacturers’ Association AGM, in response to representations made to him by the association.
Meanwhile in a response to the GRA statement, DDL said it felt that the GRA has vindicated it since it confirms that the Court of Appeal did uphold the ruling of Justice Gregory-Barnes, that the court also upheld the decision that on a proper interpretation of the Act, the Consumption Tax must be calculated on a notional basis based on that ex-factory cost basis, and that the C-Tax ought to be calculated on the basis of the actual wholesale selling price. The DDL statement yesterday also said that the company was represented by Senior Counsel Rex Mc Kay and Miles Fitzpatrick.
