Opposition Leader Dr Bharrat Jagdeo has registered his “strongest condemnation” of what he described as the scandalous ‘out of court settlement’, recently agreed to between Demerara Distillers Limited (DDL) and the Guyana Revenue Authority (GRA).
Jagdeo, in a statement, questioned the secrecy and rationale of the agreement regarding DDL’s tax liabilities, as a
result of which the State lost billions of dollars in revenue.
According to former President Jagdeo, 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.
Following is the full text of the statement issued by Dr Jagdeo:
I wish to register my strongest condemnation of the scandalous ‘out of court settlement’, recently made public (by Demerara Distillers Limited and not the Guyana Revenue Authority) regarding DDL’s tax liabilities, as a
result of which, the State lost billions of dollars in revenue.
The sum owed by DDL, according to the GRA assessment, was $5.392B from 2001 to 2006. This settlement was only arrived at on March 9, 2016. It means that DDL had use of this money for 15 years. If one were to calculate
interest on this sum, at a rate of 10 per cent per annum, using only the past 10 years, the liability would amount to $10.6B. The GRA assessment of $5.392B was based on a formula handed down by the Courts, but yet DDL refused to pay. This settlement also writes off all possible liabilities in respect of Excise Tax up to March 9, 2016; so if the same situation obtains with regards to the Excise tax, between 2006 and 2016, then the liabilities would run into tens of billions more.
The settlement has opened the door for other companies to seek refunds onvtaxes paid. There have already been 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 $7.6B up to 2006, inclusive of interest.
The total would represent over $16B in revenues lost, in the case of only two companies (adding the refund for one company [$7.6] and the liabilities for DDL [$10.6B] and subtracting the $1.5B that paid by DDL in the settlement).
It should be recalled that during my meeting with President Granger I had offered to have the current Attorney- General be briefed by his predecessor, Mr Anil Nandlall about five major cases involving billions of dollars in taxes lawfully due to the State, including the DDL matter.
This offer was rejected. This 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. After
all, it is upon the treasury that we depend to fund all the social interventions that touch lives and affect the welfare of thousands of ordinary Guyanese people.
As such, the APNU+AFC Government must disclose:
1. Was an assessment of DDL’s liabilities in respect of Excise Tax for the period 2006 to 2016 done and what was the sum of that liability?
2. Who negotiated the settlement?
3. Is it legal? Was the settlement approved by Cabinet or the Board of the GRA?
4. On what principles was the sum of $1.5B arrive at?
5. How many other deals have been concluded or are being negotiated?
The lack of transparency and the secrecy with which APNU+AFC continue to manage the affairs of the State are increasingly becoming causes for concern and are now being institutionalised.
This 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 APNU+AFC Coalition told the nation they could not afford to fund. It would have taken $1.7B to keep the Wales Sugar Estate functional, thereby safeguarding 2,000 jobs and the welfare of 28,000 residents on the West Bank of Demerara. It would have taken $1.6B to continue the ‘Because We Care’ cash grant for 177,000 public school children across the country. It would have taken a further $500M in water and electricity subsidies that would have benefited upwards of 40,000 pensioners. These would have amounted only $3.8B, but were callously not funded. While these social interventions would have cost only $3.8B, this single tax deal will cost the treasury upwards of $16B for the period 2001 to 2006.
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.
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.