Guyana Stores v The Attorney General, the Revenue Authority, the Commissioncer General of the Revenue Authority
| Jurisdiction | Caribbean States |
| Judge | Barrow, J.CCJ. |
| Judgment Date | 05 March 2018 |
| Court | Caribbean Court of Justice |
| Docket Number | CCJ Appeal No. GYCV2017/005; GY Civil Appeal No. 66 of 2013 |
| Date | 05 March 2018 |
Caribbean Court of Justice
Saunders, J.CCJ.; Hayton, J.CCJ.; Anderson, J.CCJ.; Rajnauth-Lee, J.CCJ.; Barrow, J.CCJ.
CCJ Appeal No. GYCV2017/005; GY Civil Appeal No. 66 of 2013
Mr. Stephen Fraser for the appellant.
Ms. Kim Kyte-Thomas, Ms. Oneka Archer-Caulder and Ms. Judy Stuart-Adonis for the 1st respondent.
Mr. Ronald Burch-Smith, Mr. Mark Waldron and Mr. Keoma Griffith for the 2nd and 3rd respondents.
Revenue law - Taxation — Demand for unpaid taxes where no notice of assessment was served on taxpayer — Constitutionality of 2% minimum corporation tax — Whether tax amounted to a forced loan.
In this matter, Guyana Stores Ltd. (“the Company”) challenged by the Second and Third respondents (“the Revenue Authority”) to pay the sum of $3,811,346,397 for unpaid taxes. The Company maintained that the Revenue 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 outlined in ss. 70, 72, 76 and 78 of the Act. The Company also claimed damages and punitive damages for breach of the Constitution.
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. His Lordship did not hear arguments on the merits and his findings were solely based on the procedural deficiencies he identified.
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. Additionally, in relation to s. 10A of the Corporation Tax Act and its 2% minimum corporation tax, the Company also argued, among other things, that (a) the purported tax was not truly a tax but a forced loan and as such it amounted to a compulsory acquisition of property; (b) the imposition of the tax where no corporation tax is payable for ‘loss years’ was made in “bad faith, unreasonable, arbitrary, capricious, whimsical, unconstitutional, null and void and in contravention of Articles 39, 40 and 142 of the Constitution”; (c) it was only where corporation tax was payable that the 2% minimum tax may be imposed, and in a ‘loss year’ no tax is payable so the 2% minimum tax may not be imposed; (d) the proper interpretation of the Corporation Tax Act excluded the imposition of any taxes in years where the company is unprofitable; and (e) the 2% minimum tax was disproportionate, unconstitutional, null and void, insofar as it violates the constitutional requirement of proportionality.
The CCJ did not agree with these submissions and found that there had been no violation of the Company's constitutional right to protection from deprivation of property. The Court held that the 2% minimum corporation tax was not a loan because the State does not repay the taxpayer nor does the taxpayer have any right to repayment or redemption, which were crucial elements of any loan. Under section 10A the taxpayer simply gets a credit, if and when the stated conditions are met, and may then apply that credit in reduction of its tax liability but it is never entitled to repayment. The Court also found that the provisions of the Corporation Tax Act were clear and unambiguous so that Parliament must be taken to have considered the implication of taxing turnover as distinct from taxing profit, and felt satisfied there was no need to exclude loss years or safeguard the taxpaying company's capital. The Court also rejected the argument that the 2% tax was disproportionate as the Company failed to raise facts or circumstances that would support this claim.
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.” Since the legislation was constitutional, if the Revenue Authority had been wrongfully interpreting and applying the section, this alleged misapplication should have been challenged by following the statutory procedure, not by constitutional action. The Income Tax Act provided a specialized procedure for challenging its application and as such it was an abuse of process for litigants to bring claims for constitutional relief in matters where not only was an alternative remedy available but that remedy was the natural and, in particular cases such as the present, the statutorily provided recourse. Even if the Company was persuaded it had a constitutional challenge to the taxing statute, the recourse provided by law for challenging a liability to tax was not overreached or neutralized by bringing the constitutional challenge.
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 documents produced in evidence included letters, statements of assessment and a demand notice by which the Revenue Authority duly informed the Company of the amount in which it had been assessed. The Company had been filing tax returns and had previously accepted the liability to pay the 2% minimum tax and, manifestly, the Company was notified of the tax assessed for each year. It was, therefore, perfectly open to the Company to notify the Commissioner of its objection, as the Act provides, and it is inconceivable that the Commissioner would have said, ‘I did not serve you with a notice of assessment, therefore you may not object to the assessment of which I have notified you and so I reject the objection that you have made.’
It was evident that the Company would have known the procedure for challenging an assessment by the fact that a firm of accountants, who must be taken to know same, was acting on behalf of the Company in its dealings with the Revenue Authority. In addition, the Commissioner had recently written to the Company informing it of its right to object and the procedure for doing so. Furthermore, nothing stopped the Company from bringing two sets of proceedings, one in the High Court challenging an alleged constitutional violation and another before the Commissioner and the Appeal Tribunal.
Having considered both issues raised in the appeal, the CCJ held that the demand remained undisturbed. The Court noted that it had not been directed to anything which gave it jurisdiction to review and hear an appeal against a tax assessment. There was also no possibility of the Court engaging with the liability to tax by way of a judicial review challenge on the putative ground that the decision to impose or demand the sum assessed was an ultra vires or otherwise unlawful decision taken by the Revenue Authority in violation of administrative law principles.
Broad considerations of justice beyond the strict application of the law gave rise, during the hearing of the appeal, to considering whether it would be competent and appropriate for the Court to send the challenge to the liability for tax to go through the review and appeal process under the Act, since this is the proper statutory process for resolving the dispute. The Court, however, concluded that there was no basis for it to intervene to protect the company from the consequences of its decision to not follow the statutory provision for disputing a tax liability. It must be left to the Company and the Revenue Authority, as well as the State in its greater capacity, to resolve the dispute as to the liability to tax if, indeed, beyond the Company's challenge to the constitutionality of the 2% minimum tax, there was really a dispute.
The appeal was...
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