Govt must take responsibility for Banks DIH $28B claim – Jagdeo

… set precedent with DDL $3.8B tax write-off

The Government has taken a tough stance against Banks DIH Limited’s multibillion-dollar lawsuit against the Guyana Revenue Authority (GRA).

However, according to Leader of the Opposition, Dr Bharrat Jagdeo, the fault lies not with Banks DIH but with Government for the “horrendous” $3.8 billion tax write off to competitor, Demerara Distillers Limited (DDL).

That write-off, which was granted by the coalition to Demerara Distillers Limited (DDL), followed over 15 years of litigation with the GRA over its tax payments. Jagdeo expressed skepticism of Finance Minister Winston Jordan and Attorney General Basil Williams’ posturing, stating that Banks DIH would never have made the claim were it not for that write-off.

“I saw the Attorney General and the Minister of Finance pledge that they will vigorously oppose Bank’s DIH claim in the courts. And there is one point that both of these gentlemen missed. This claim by Banks DIH for refund from the Treasury was triggered by an action of the Government,” Jagdeo said.

“And had that action, that event, not taken place, then Bank’s DIH would have never made such a claim. And so, until now the questions remain unanswered. Who gave the horrendous write-off to DDL that triggered this claim?”

“Was it the Commissioner General? Was it the Board of Directors? Was it the Minister of Finance? Or was it the Cabinet? And when we have an answer to that question, then we will be able to examine whether this claim or this write-off was done by the authorised party and was legal.”

According to Jagdeo, Banks DIH is only looking out for its shareholders’ interest and was not at fault for seeking this resolution. Approaching the issue from the company’s perspective, Jagdeo said that the two companies (Banks and DDL) are in the same sector, and if one got preferential treatment to the tune of billions, then the other would protest.

The former Head of State noted that rather than the AG and the Finance Minister criticise Banks DIH, they should examine why it happened. According to Jagdeo, Government has not been transparent on this issue. The Opposition Leader further accused the Government of skirting responsibility.

“It happened because of this Government’s action, but they will not take responsibility for it. And if you think this is $3.8 billion, it’s going to mount. A year and a half ago I said this action (write-off) is going to cost us $80 billion in the Treasury. And it’s going to happen.”

Govt’s position

Just a few days ago, Williams declared that Banks DIH will be fighting a lost cause against the GRA. He had stated that all efforts will be exhausted to ensure that not a dime comes out of the public purse to refund Banks DIH.

This comes despite the fact that DDL, last year, benefited from a whopping $3.8 billion tax write-off. Back in 2002, DDL filed a legal challenge against the GRA over the Commissioner General’s assessment that consumption taxes owed by that company exceeded $1 billion, for the period January 2001 to September 2002.

It was eventually quashed by the High Court on February 1, 2005. The GRA then moved to the court of Appeal. On July 31, 2008, the Court of Appeal dismissed this appeal on the ground that the Commissioner General had used a wrong formula for the calculation of the consumption taxes.

In 2009, the Commissioner General then assessed DDL’s consumption tax liabilities for the period 2001-2007. The newly assessed liability of DDL for that period came up to $5.3 billion. Again, DDL filed legal proceedings challenging this assessment.

GRA then retained an external Senior Counsel (SC) and was in the process of defending this challenge when the A Partnership for National Unity/Alliance For Change (APNU/AFC) coalition assumed office.

Instead of the new Government continuing to defend against DDL, the beverage company was granted a $3.8 billion tax write-off and only paid $1.5 billion.

Banks DIH, in December 2016, proceeded to file legal proceedings against the Attorney General and the GRA, claiming over $28 billion in repayments in light of the tax write-off granted to its competitor.

Banks DIH had paid some $12.8 billion in taxes over the period 2001 to 2006. But in light of the DDL tax write-off last year, the beverage giant calculated that it should have only paid some $3 billion.

The company argued that the Government would be “unjustly enriched” if it retained approximately $9 billion (the difference between the paid amount in taxes and the net figure Banks DIH estimated it should have paid).

In this regard, Banks DIH claimed that it is entitled to some $9 billion plus 10 per cent interest compounded over the period 2001 to 2006 resulting in a total of some $28 billion after taking into account the settlement figure payable by DDL of $1.5 billion.

The GRA, in a statement on Wednesday, said it will respect the court’s jurisdiction by not litigating issues of law in the public domain. (Guyana Times)