Guyana to lose GUY$1 billion annually after Environmental Tax is repealed

Last Updated on Thursday, 30 July 2015, 22:06 by GxMedia

Guyana stands to lose at least GUY$1 billion annually after the National Assembly repeals an environmental tax on beverage containers in keeping with a ruling by the Caribbean Court of Justice (CCJ),  Finance Minister Winston Jordan said Thursday.

Opening debate on an amendment to the Customs Act to repeal the tax- GUY$10 per each container- he said the loss would amount to a “significant impact on the treasury.” 

“The tax has yielded and excess of GUY1 billion dollars to the treasury… obviously its removal will have a significant impact,” said Jordan, who added that government intends to explore alternatives which can be implement as the soonest convenience.

The bill now awaits the assent of President David Granger before its sole provision, that is, the repealing of the discriminatory tax, to be repealed. Attorney General, Basil Williams said  nevertheless said that government would ensure that government ceases the collection of the tax by the 31^st of July 2015.” Williams further announced that Guyana would inform the CCJ during a video-conferencing hearing on Friday that the damages of US$6.2 million would be paid in full and final discharge to the Surinamese company, Rudisa Beverages, that had taken Guyana to the regional court. He added that Guyana has until January 31, 2016 to complete the payment.

Due to the decision by the previous government not to pay the damages, the amount has grown to US$7.72 million but the company and the Guyana government have recently negotiated a settlement of US$6.2 million.

In terms of the impact of paying the tax on the Treasury, the Finance Minister said “we would be hardpressed to do it by a treasury that is burdened by both direct and indirect expenditures.”

That company had successfully argued before the regional trade court that the Enviornmental Tax under the Customs Act had violated the Caribbean Community’s Revised Treaty of Chaguaramas. The CCJ agreed that the tax infringed the treaty because it should not be levied on goods of community origin.

The Finance Minister acknowledged that in keeping with Guyana’s Constitution and environmental laws, there should be wide-ranging consultations that would eventually allow relevant agencies to enforce the “polluter-pays-principle.

The previous People’s Progressive Party Civic (PPPC) administration had argued against Guyana paying the damages on the grounds that the company had already recouped the loss by adjusting the prices for its products. However, Guyana had provided no evidence to prove that point.

It is unclear how much money from that tax had been spent on cleaning up the environment over the years.

In the Act’s Explanatory Memorandum it is made clear that the proposed legislation seeks to “repeal Section 7A (of the principal Act) which provides for the collection by the Commissioner General of the Guyana Revenue Authority of environment tax on every unit of non-returnable container of imported beverage.”

It further states that “upon repeal of Section 7A predominant stakeholders and the Government would hold discussions in an effort to craft legislation that meets general acceptance and consensus.”

In 2014, the CCJ found that Guyana violated Article 87 (1) of the Revised Treaty of Chaguaramas (RTC) which precludes member-states from “imposing duties on goods of a community origin. In contravention of this provision, Guyana, in 1995, imposed on Rudisa Beverages and Juices, a Surinamese beverage company, an environmental tax of GUY$10 on all imported, non-returnable beverage containers the company brings into the country. Rudisa was awarded US$6,047,244 (some GUY1.2 billion) – the amount Guyana collected from the company in taxes since 1995 – by the CCJ – which also asked the government to cease the collection of the tax.

Guyana’s failure to comply with this judgment more than a year later has caused the amount awarded to the beverage company to increase to GUY$1.6 billion. Moreover, Guyana’s failure in this regard is a breach of Article 215 of the RTC and of Article XV of the Agreement Establishing the CCJ.

Attorney General and Minister of Legal Affairs, Basil Williams, making his contributing presentation to the debate on the amendment bill, announced that government is close to paying the owed amount, following an agreement with the company for a reduced payment.

“Unlike the previous administration Sir, we will pay the judgment because the responsibility under treaties must be obeyed… I am pleased to announce that the matter is fixed for tomorrow…We have arrived at a settlement in this matter,” Williams told the National Assembly.

Last year, the former administration attempted to eliminate the discriminatory nature of the tax as opposed to the tax itself by the introduction of a similar tax locally. This attempt took place when former Finance Minister, Ashni Singh, brought the former government’s Customs (Amendment) Bill 2014. The so-called – A Partnership for National Unity (APNU) + Alliance for Change (AFC) – combined opposition, however, which had the majority seating in the National Assembly, voted against the bill.

The parties argued that the solution was not to impose an additional tax on locals, but to repeal the discriminatory tax, which was problematic to begin with. Foreign Affairs Minister, Carl Greenidge, making his contribution to the debate, said that “when the then government imposed this tax it was not unaware that it infringed the treaty.” Greenidge said that “it was made clear that the bill infringed the RTC when it was laid,” and said that the former administration “took its own time to agree to eliminate the imposed tax.”

As such, he said, the current administration refuses to accept the blame the PPPC has be attributing to it for approximately a year now.

Revealing a bit of fact that has not received much attention to date, Jordon revealed that the former administration, in its attempt to convince the CCJ that Rudisa should not be awarded damages, argued that the company has been passing the tax onto the citizens of Guyana by calculating the tax into the price for which it sells its beverages.

Jordan said that this argument failed to sway the CCJ, and suggested that it may have been more compelling had the former administration adduced evidence to substantiate the argument.

(additional reporting by Chevy Devonish)