Local conglomerate Banks DIH is disputing a tax assessment for an additional $500 million by the Guyana Revenue Authority (GRA) in relation to a subsidiary, Citizens Bank.
Speaking at Banks DIH’s Annual General Meeting (AGM) yesterday at Thirst Park, Chairman Clifford Reis noted that on December 20th, 2018, the company received Notices of Assessment from GRA, claiming additional corporation taxes of $534,416,000.
The area of contention appears to be the application of Supervisor Guidelines issued by the Bank of Guyana (BoG), against International Financial Reporting Standards (IFRS).
According to Reis, while the company acknowledges its obligations to comply with provisionary requirements under both IFRS and the supervisory guidelines issued by the BoG, it utilised the former to compute its impairment losses on financial assets, and, thereby, claimed deductions on its corporation tax, as provided for in Section 16(I)(e) of the Income Tax Act.
Specifically, according to the 2018 Annual Report, “The group’s approach…is guided by IAS 39-Financial Instruments: Recognition and Measurement.” The report also notes that the Bank is subject to prudential reserving rules as stipulated by BoG in its Supervisory Guidelines 5 (SG5) Loan Portfolio Review, Classification, Provisioning, and other Related Requirements.
“Where the impairment provision required under SG5 is greater than that required under IAS 39, the excess is dealt with as an appropriation of retained earnings to a general banking risk reserve,” the report explains.
Reis noted that every commercial bank has been faced with this issue and said they are prepared to file objections since previous applications of these measures have never been disputed by GRA.
Citizens Bank Guyana Inc, a 51% owned subsidiary of Banks DIH, recorded a revenue of $3.160 billion last year. The profit before tax was $1.009 billion and the profit after tax was $602.3 million. Additionally, the net interest income was $2.24 billion and the earnings per share was $10.12 billion, while the total assets base was $50.5 billion. Loan assets, however, decreased from $28.2 billion to $25.5 billion in 2018 and customer deposits were $40.9 billion compared to $40.6 billion in 2017.
GRA has disallowed the company’s claims for deductions for impairment losses on financial assets in relation to the years of income ended 30 September, 2010 to 2012 and 2014 to 2016 inclusive.
Reis, however, was confident that the ongoing negotiations with the agency would yield positive results.
“I don’t think it will go beyond these negotiations…the first step is not fireworks. There was an assessment, we are in negotiations but being a material number of 500 million plus, it is my right to inform shareholders. You don’t want them to be surprised by a large liability,” he explained.
