Guyana could have successfully defended the action by Rudisa/CIDI

Mr. Anil Nandlall, former Attorney General, has raised on his Facebook page the issue of the Environmental Tax paid by the Surinamese company Rudisa and its Guyana subsidiary Caribbean International Distributors Inc. (Rudisa/CIDI). He suggested that the current Attorney General “either did not study the [CCJ] case or having done so is still unappreciative of its gravamen.” The decision in that case was handed down on May 8, 2014 but the PPP/C Government did not comply with an order of the Court that the Government repay with interest the sum of US$6,047,244.77, and further amounts collected up to the date of the judgment. The matter was resolved only after the APNU+AFC Government gave an undertaking to cease collecting the tax and to repay the full amount collected from Rudisa/CIDI.

Mr. Nandlall was not the AG when the PPP/C introduced the tax in 1995 but it would have been gracious of him to acknowledge that the PPP/C Government erred when it introduced a tax that clearly violated WTO Rules, and compounded its error by continuing to collect the tax from CARICOM companies after the Revised Treaty of Chaguaramas was incorporated in Guyana domestic law in 2006.

The matter has assumed important currency following the commencement of a similar action in the CCJ by the Trinidadian-owned Guyana Beverages Inc. which has paid more than two billion dollars in Environmental Tax. That money, like the Rudisa money, was spent by the past administration, and the current Finance Minister is faced with the serious risk of having to pay back this huge sum. In an ironic twist of fate, proposed legislation to address the problem introduced in 2013 by the PPP/C administration was rejected by the APNU and the AFC MP’s!

In his Facebook comments, Mr. Nandlall took issue with a statement by Mr. Williams that the Government of Guyana never led evidence to show that the Environmental Tax paid was passed on to the consumer, claiming that passing on was never “a disputed issue”. The problem for Mr. Nandlall is not only that passing on was and is the principal defence to an action for reimbursement, but as the judgement at paragraph 30 states, Mr. Nandlall submitted that no such reimbursement should be made to the Claimants (Rudisa/CIDI) because the latter must have already passed on the tax “by a re-adjustment of the price”.

The Court rejected that submission, finding that Guyana “presented no evidence to show that the Claimants have in fact passed on the environmental tax to their customers. The mere assertion that the Claimants are motivated by profit and that the tax must (CCJ emphasis) have been passed on is not enough.” Having failed to prepare adequately the case which he chose to argue himself, Mr. Nandlall sought to establish, belatedly, the presumption of passing on by way of “robust cross examination”. That could not and did not find favour with the Court.

While criticising Mr. Williams’ understanding of the case, Mr. Nandlall states on his FB page that Rudisa contended that it was “forced to lower the price of its product destined for the Guyana market below their market-value to offset the environmental tax.” He then goes on to state that “Rudisa absorbed the losses or the equivalent of the environment tax in Suriname before the product arrived in Guyana. They led evidence to establish that they sold similar products in other territories in the Caribbean at a price higher than they sold those same products for to their Guyanese distributor”.

That is not what the judgment states. It states at paragraph [31] that “Rudisa Beverages would invoice goods to CIDI at FOB Suriname prices with Rudisa Beverages bearing the insurance and freight charges.”

Another easily rebuttable evidence from Rudisa, accepted by the court presumably because it was unchallenged by Nandlall, was that Rudisa and its local subsidiary “absorbed the loss occasioned in order to retain their 50% market share”. Yet, if Mr. Nandlall had done minimal research he would have realised that the Guyana subsidiary never had any such market share. He would have learnt too that CIDI did not commence operation in Guyana until July 2007, the company having been incorporated three years earlier. He might even have argued that the tax was incidental to the company’s carefully planned strategy and that Rudisa/CIDI opted for a market penetration price to earn rather than to retain market share.

It is probable but speculative that Guyana could have successfully defended the action by Rudisa/CIDI. Clearly Mr. Nandlall’s preparation and advocacy of the case was seriously deficient, and cost the country heavily. How the consequence of that poor performance will impact on the present case is a $2 billion dollar question.

Straw man fallacy

Please permit me to comment on a letter by Mr Ruel Johnson (SN January 6, 2016: ‘It is good to show we are capable of clemency but first we must show we can deliver justice’).

That letter was partly in response to a letter by me in Stabroek News January 5, 2016 ‘Treatment of Sattaur by persons from the GRA is not acceptable’.

My letter addressing four main points spoke for itself. I believe therefore that Mr. Johnson was engaging in the classic straw man fallacy of creating, in order to refute, a point not made in my letter.

I will not pursue any further correspondence or argumentation on this matter.

Ram & McRae was never provided with any proof of an $82M deposit to any Republic Bank account holder

Some time ago, Messrs Ronald and Rustum Bulkan, Joint Managing Directors of Precision Woodworking Limited (PWL) called to request a meeting with me. Although we had brought the auditor-client relationship between Ram & McRae (the firm) and the company to an end for professional reasons several years earlier, I agreed to meet with them at our office.

At the meeting, the company’s directors informed me that there was an issue between Republic Bank (Guyana) Limited and PWL as an account holder of the Bank over what they claimed was a deposit of a certain sum of money to the company’s account. They explained that they were seeking my representation in the matter.

I responded that for professional reasons, neither the firm nor I could offer any representation or information to them in the matter. What we did not disclose was that, out of an abundance of caution, we not only reviewed the working papers in our office but a partner of the firm was asked to carry out a further review of the alleged deposit. We found that there was no such deposit.
Continue reading Ram & McRae was never provided with any proof of an $82M deposit to any Republic Bank account holder

Treatment of Sattaur by persons from the GRA is not acceptable

Commissioner General of the Guyana Revenue Authority Mr Khurshid Sattaur erred gravely when he shared taxpayers’ information with the administration. However irrestible the demand, he ought to have made it clear that he would not comply. Instead, he compromised himself, his office and his profession. A complaint of professional misconduct was made to the local and international professional accounting bodies but was later withdrawn. There was therefore no adverse finding against him.

Seven months into a new government, the public learns that Mr Sattaur has been sent on leave to facilitate a forensic audit of the authority. I accept that, even with the apparent inconsistency.

What I do not find acceptable is the humiliating treatment he is reported to have received from persons from the Revenue Authority. If the report of leave is correct ‒ and there is no reason to doubt this ‒ Mr Sattaur remains Commissioner General and a member of the Governing Board of the GRA. He does not cease to be either because he is on leave. It is rare and improper for persons on leave to have their homes visited by their subordinates and computers and firearm taken away from them. In the case of a taxman for whom threats to life are an occupational hazard, the danger is obvious and is recognised in his being provided with a guard and a firearm licence.
Continue reading Treatment of Sattaur by persons from the GRA is not acceptable

It was a serious error to treat a special package for the AG as a benchmark

Prime Minister Moses Nagamootoo appears to have intended to dismiss the public’s response to the 50% salary increase for Cabinet members in describing it [the response] as “comparable to beating a dead horse”, adding that “this rage has run its course”. (SN Oct 22 ‘Pay hike necessary to offset ministers’ loss of earnings’). The latest evidence to the contrary is a letter by Mr Nowrang Persaud in yesterday’s Sunday Stabroek (25-10-15) ‘Attorney General’s salary should have been red-circled’.

In his letter, Mr. Persaud refers to a report touching on the differential between the salary of the Attorney General and the rest of the Cabinet on the need some decades ago to ‘import’ a Guyanese legal luminary with unique competences. In his last week’s Stabroek News column on the subject of the increases, Mr. Ralph Ramkarran had identified the package offered by Prime Minister Burnham to Sir Shridath Ramphal. Mr. Ramphal was at the time working in a top law firm in Jamaica, and in his new position in Guyana would be designated responsibility for two disparate portfolios – Attorney General and Minister of State for External Affairs – with the additional task of drafting the emerging country’s Independence Constitution.

It seems from his writings that Mr. Ramphal did his best to discourage Mr. Burnham from employing him: he would only accept the position as a technocrat without party affiliation; was doing well financially in Jamaica with his family; if for any technical reason he had to sit in the Legislature, he wanted no vote and would not be subject to any party whip. But as he said, Forbes Burnham was not easily put off and agreed to all his conditions, presumably salary included.

While the assertion that Mr. Ramphal received a special package is correct, it is unlikely to be the source of the link between the salary of the AG and that of the Chancellor. There was no Office of Chancellor at the time in 1964. A senior PNCR member explained to me that the link came much later when Chancellor Keith Massiah accepted President Hoyte’s invitation to become Attorney General and Minister of Legal Affairs.

In both cases – and I do believe the comparable situation is Justice Mr. Massiah’s – the appointment and the link were unique. Accordingly, the link should have been discontinued a long time ago, and certainly by the Granger Administration which came in to office on a promise of change. The incumbent AG is an elected member, not a technocrat and not a former Chancellor, and would not otherwise qualify for any special package. In my view therefore it was a serious error to treat such a package as the benchmark against which the salaries of other Cabinet members should be adjusted.

Mr. Nagamootoo declares that “any numbers could have been agreed for me, for the Prime Minister and it would have been fine”. That is noble but it would have been more convincing to his Cabinet colleagues and the public if he had declined any increase for himself. Instead, it appears that it was the lawyers in the Cabinet, who are in a minority, who argued that since their previous incomes were higher than they were originally receiving as cabinet ministers, they were entitled to the substantial increases.

Clearly not all of the Cabinet members are lawyers or were otherwise engaged in employment earning hefty taxable income. But even if they were, are they any less willing to serve than Peter D’Aguiar who left his top job at the most successful public company at the time to become Finance Minister? Even as an avowed capitalist Mr. D’Aguiar placed country before self. He did not insist that his Ministerial salary must be comparable with his colleague Ramphal’s, or that he should receive compensation no less than what he was receiving as the Managing Director of Banks DIH Limited.

And while we focus on the 50%, let us not forget that the number of Ministers has been increased, partly by increasing the number of ministers in some ministries and partly by splitting ministries and reducing the workload of many of them. This is the case with the Office of the Prime Minister, the Ministry of Home Affairs, now separated into Citizenship and Public Security, and the Ministry of Commerce, Tourism and Industry now split into separate ministries of Business and Tourism. Effectively then, while the increase on the salaries is 50% for Cabinet Members, the overall cost to the country is much greater, particularly when all the perks, some of questionable lawfulness, such as the tax free salary for the AG and maid and gardener allowances are taken into account.

Now that a leader of the AFC has expressed a position, the most saddening part of the episode for me is the eloquent silence of the leadership of the Working People’s Alliance. It is a party with a deserved reputation for speaking out on issues of political morality, conflicts of interest, misuse of power and fairness to and for the working class. While it was with some relief that I learnt that the Executive of the party is unhappy with the decision by Cabinet, if they want to restore the party’s reputation, they will have to do more than bear their unhappiness in silence.