Other companies will use deal as ammunition to get tax refunds – Jagdeo
…Govt will lose billion
Beverage giant Demerara Distillers Limited’s (DDL) whopping $3.8 billion Consumption Tax write-off from the Guyana Revenue Authority (GRA) just opened avenues for other companies to seek refunds on taxes paid, thus ultimately depriving the state of billions of dollars.
Condemning in the strongest possible sense the controversial out-of-court settlement, Opposition Leader Bharrat Jagdeo disclosed that already there are reports in the private sector of other major companies consulting lawyers about this possibility.
“Management officials from a major local alcohol and beverage producing company have made it clear, in the past when I was President, that the company would be seeking a refund depending on the outcome of the DDL matter. If this company were to conservatively use DDL’s case to advance a call for a refund of taxes it paid this could result in the treasury balance being further diminished. Extrapolating the refund for one company on consumption tax alone could total some $7.6 billion up to 2006, inclusive of interest,” he pointed out in a statement to the media on Saturday evening.
He added that the total would represent over $16 billion in revenues loss, in the case of only two companies (adding the refund for one company and the liabilities for DDL [$10.6 billion] and subtracting the $1.5 billion that was paid by DDL in the settlement).
Jagdeo reminded that during his meeting with President David Granger, he had offered to have the Attorney General Basil Williams be briefed by his predecessor Anil Nandlall about five major cases involving billions of dollars in taxes lawfully owed to the State, including the DDL matter; however the offer was rejected.
“The offer was made because the People’s Progressive Party/ Civic (PPP/C) believes we must safeguard the State’s revenue sources and this is not a matter that ought to be contaminated by politics,” he stated.
Jagdeo also argued that the DDL settlement, as well as the possibility of other companies seeking refunds, will cost the State billions in revenue dollars – billions that could have been used in areas that the coalition government told the nation they could not afford to fund.
“It would have taken $1.7 billion to keep the Wales Sugar Estate functional, thereby safeguarding 2000 jobs and the welfare of 28,000 residents on the West Bank Demerara.
It would have taken $1.6 billion to continue the ‘Because We Care’ cash grant for 177,000 public school children across the country.
It would have taken a further $500 million in water and electricity subsidies that would have benefited upwards of 40,000 pensioners.
These would have amounted to only $3.8 billion, but were callously not funded. While these social interventions would have cost only $3.8 billion, this single tax deal will cost the treasury upwards of $16 billion for the period 2001 to 2006,” he stated.
Jagdeo further contended that the settlement sends the wrong message to the business community, “that a company can unilaterally decide to stop paying taxes, while other companies comply with the law, take the matter to court and drag it out until a sympathetic government comes to power and settles its debts to the State.”
He explained that the potential cost of this single settlement and its possible consequences amount to more money than the State received in loans and grants in any single year.
“We call on the international community and in particular the international financial institutions to note this wanton and deliberate haemorrhaging of the National Treasury by the coalition Government,” he urged.
Moreover, he asserted that the lack of transparency and the secrecy with which government continue to manage the affairs of State are increasingly becoming causes for concern and are now being institutionalised.
He therefore demand that government disclose critical information in relation to this tax deal, including whether or not an assessment of DDL’s liabilities in respect of Excise Tax for the period 2006 to 2016 was done and what was the sum of that liability; who negotiated the settlement; if the settlement was approved by Cabinet or the board of the GRA; on what principles was the sum $1.5 billion arrived at; and whether other deals were concluded or are currently being negotiated.
Furthermore, observers are questioning the secrecy with which this multibillion dollar tax write-off was negotiated which has now given credence to a claim by former Commissioner General of GRA Khurshid Sattaur that he was asked to get involved in unsavoury acts, including massive tax write-offs.
In January 2016, when Sattaur was fired, he made some damning revelations, among them was he being asked on “repeated occasions” since the new government took office to do various things such as settling taxpayer’s cases for meagre sums that would have cost the country billions of dollar in lost revenue.
While Sattaur at the time did not name any individual or company, the DDL case may very well be one such which he had referenced.