PPP/C’s Income Tax Act amendment is also unconstitutional

The Stabroek News of Friday January 6, 2017, reported that two parliamentary representatives of the PPP/C criticised but abstained from voting on an amendment to the Value-Added Tax giving the Commissioner General the right to prevent persons, through the Chief Immigration Officer, from leaving the country once they owed VAT.

And in the letter columns of the Stabroek News of January 7, former Attorney General, Mr Anil Nandlall returns to the issue with a reasoned argument whether the amendment violates the Constitution and is therefore void (‘Section 45 of the VAT Act is unconstitutional’).

This is interesting because in 1993 then PPP/C Finance Minister, Mr Asgar Ally inserted by way of an amendment to section 71 of the Income Tax Act a new provision that is arguably more dangerous than the APNU+AFC’s amended VAT provision. Taking Mr Nandlall’s argument, it means that the PPP/C’s amendment to the Income Tax Act is, at best, on the same tenuous constitutional ground as the APNU+AFC’s amendment to the VAT legislation.

Garnishment and Distress Proceedings

Two proposals announced in 2017 Budget Speech – inserting into the Income Tax Act distress proceedings similar to the provision in the Value-Added Tax (VAT) Act, and garnishment of funds in bank accounts for the settlement of tax arrears – have caught the national attention. The discussion has not been helped by the misinformed and misguided statements in the media, even by columnists and persons who have a duty to be better informed.

That failure which is the cause of much of the confusion, misinformation and “noise”, has led to a situation whereby two very different provisions are conflated and wrong premises are used to defend or justify the two proposals. They should be addressed separately. Here is why.

The terms garnishment and distress are of significant legal and constitutional import and depending on circumstances may have different application to action against the person (in personam) and against the thing or property (in rem). As these matters apply to our Constitution they also raise the tension, if not the clash, between, on the one hand, Article 65 which grants to Parliament the power to “make laws for the peace, order and good government” and on the other hand, Article 142 which protects property rights subject to exceptions, as well as Article 8 which makes void any law inconsistent with the Constitution.

But first a piece of history. There was no garnishment provision in the original British Guiana Income Tax Ordinance passed in 1929. That came thirty-three years later as one of the measures introduced by the PPP Government in Act 11 of 1962 to give effect to that year’s Budget presented by C.R. Jacobs Jnr. but which came to be known as the Kaldor Budget. Persons from my generation will recall that that Budget was described by then Opposition leader Forbes Burnham not as the cause of war but the occasion for it. Of course, being an erudite lawyer, Burnham used the Latin for the aphorism although as the events unfolded in February 1962, the consequences were far from learned.

So what is now being proposed is the crude strengthening of a measure to which the PNC and the United Force were violently opposed and were prepared to do anything to block it, among others. Our columnists and self-serving and opportunistic politicians who have had an epiphany about the illegality and evils of tax evasion being such a bad thing may wish to go on the internet and google Wynn-Parry Report.

Both distress proceedings and garnishment are provided for in the VAT Act (section 49 and section 51 respectively) although instead of the word Garnishments used in the marginal note in the Income Tax Act, the corresponding marginal note in the VAT Act is “Recovery of tax from third parties”.

While the provision in the Income Tax Act pre-dates the 1980 Constitution and the VAT Act came much later, both are subject to the Constitution. And while the Constitution naturally allows an exception to the protection of property Article in the case of taxation, (otherwise how would the government be able to finance public services?) a taxing statute or a provision therein may be set aside as unconstitutional if it is confiscatory, discriminatory, disproportionate, or provides inadequate protection machinery for the taxpayer.

Perhaps somewhat confusingly, section 49 of the VAT Act speaks of both “distress proceedings” and “executing distress”. Distress is a summary remedy by which a person is entitled to take possession of the personal chattels of another without legal process while execution imports a legal process to give effect to a judgement of the Court. Moreover, section 49 is directed at goods, including perishable goods and allows the entry into premises accompanied by a police officer. Clearly, the Minister of Finance could not be referring to this section in discussing the expansion of garnishing funds from bank accounts.

The garnishment provisions of the VAT Act in fact mirror those of the Income Tax Act and have no direct or indirect reference to a bank account. Since the Minister wants to harmonise the VAT and the Income Tax Acts in these enforcement procedures, it may be presumed that the VAT Act will also be amended in this regard.

With respect to garnishment under the VAT Act, it is highly doubtful that the Commissioner can lawfully apply the provision before he has made a proper assessment on the taxpayer and after the taxpayer has exhausted his right of objection to the Commissioner, and appeals to the VAT Board of Review and to the High Court. Of course, if the taxpayer refuses to exercise his statutory rights of appeal, or to seek a remedy by way of judicial review, the Commissioner General would be within his rights to pursue the debt.

Absent from the discussion too, is any recognition of two other drastic procedures for recovery provided in the Income Tax Act. The first is under section 97 providing for the enforcement of a tax debt by way of parate execution, a Roman Dutch legal concept generally available to banks. As applied in the Income Tax Act, parate execution allows for the relatively speedy process for the disposal of property by the GRA. The second is under section 101 which provides that a certificate registered with the Registrar of the Supreme Court has the same force as a judgement of the High Court. The Act is unclear whether the Commissioner is required to avail himself of the section 101 process before seeking to apply 102. But instructively, section 101 is also a product of the 1962 Act referred to above.

It is probable that the idea for the introduction of distress proceedings into the Income Tax Act arose from someone who is unaware of sections 97, 101 and 102 of that Act and of the Rules of the High Court dealing with enforcement of judgements. The Commissioner General has confirmed that the distress and garnishment provisions in the VAT Act have never been applied and we know as well that the Income Tax provisions for parate execution under section 97, for a certificate under section 101 and for garnishment under section 102 have not been applied in all or the better part of fifty-four years, so why should anyone believe that strengthening any one of them is necessary? Does Prime Minister Moses Nagamootoo, the leader of the National Assembly know these things or wants to know them, insulated as he is from the day to day challenges of the working class whose interest he once claimed to champion?

The measures purportedly to improve tax administration seem more designed as a substitute for effective, professional administration and constitute a textbook case of draconian legislation. To use the words of the Sri Lankan Bar Association in similar circumstances, the proposed legislation is “discriminatory, draconian in their nature and harsh and superfluous”, grounds under which it successfully brought a constitutional challenge.

Provisions of the various Tax laws already give the GRA enormous powers for the administration of the Act and the collection of taxes. Its new head is familiar with the successful operations of those laws, having been part of the tail end of the glorious days of the Inland Revenue Department when it was respected for its professionalism, impartiality, competence and independence, characteristics which no doubt enabled it to operate effectively using the existing laws.

The new head does not need new, additional and draconian powers to be effective. He needs to apply the existing tax laws without fear or favour, with the same deference to big and small, and undaunted by touchable and untouchable alike.

Another GECOM let down

Once again, the role of GECOM in the determination and publication of the results of national and regional elections as well as its general functions have been highlighted. GECOM as it exists today is the product of the efforts to address widespread concerns that elections prior to 1992 were not free and fair. A limited reform process resulted in the 1992 elections being conducted under a seven-person Commission made up of three members named by the Government, three by the Opposition, and the Chairman selected by the President from a list of six names submitted by the Leader of the Opposition is often referred to as the [President] Carter formula.

While politically the formula was considered acceptable since both “sides” of the divide felt represented in the process, it was intended to be a temporary arrangement to be reviewed for subsequent elections. Inertia set in and the formula has remained unchanged for all five elections since 1992. It should not continue.
Continue reading Another GECOM let down

Sad state of the judiciary

Today I want to turn the spotlight on the country’s judiciary but before I do so I will briefly recap on four exchanges in the newspapers between the Office of the Attorney General and the Ministry of Legal Affairs through its Permanent Secretary, Ms. Indira Anandjit, and me.

In her second letter published on October 10 Ms. Anandjit outdoes her first on October 8 in terms of abuse, distortions and outright untruthful statements. But there was a twist. She resorted to accusing me of chauvinism, claiming, dishonestly, that I “insinuated” that she did not write the first letter of which she is yet to assert ownership. What I said is that “Mr Nandlall would shelter under the coattails of his Permanent Secretary from which to throw pebbles at me.”

Ms. Anandjit’s call for help in the name of chauvinism is equally dishonest. In my letter in the Stabroek News of October 7, critical of Anil Nandlall’s inaction on the Judicial Review Act, I did not mention her name or refer to her even once. Yet, responding in defence of Nandlall, she used the opportunity on October 8 to attack me by name eleven times. In my second letter on October 9, I mentioned her name peripherally two times. In her response on October 10, she continued her personal attack, referring to me by name eight times. Now, nineteen times against two hardly supports any genuine cri de Coeur of misogynistic victimhood.
Continue reading Sad state of the judiciary

Rules of Court for the Judicial Review Act were laid in parliament in 2010; onus is on Nandlall alone to make them operational

It was as predictable as night follows day that Mr Anil Nandlall’s Office of the Attorney General and the Ministry of Legal Affairs would justify the four-year delay in bringing the Judicial Review Act into operation with the excuse that this was dependent on the making of Rules of Court (‘The Judicial Review Act cannot be brought into force until new Rules of Court are promulgated’ SN, Oct 8).

It was even predictable that Mr Nandlall would shelter under the coattails of his Permanent Secretary, Ms Indira Anandjit, from which to throw pebbles at me. This is not unlike what he did in the case of the ceremony for the announcement of the launch of the bungled Laws of Guyana by him and his ministry for which he craves compliments.

Mr Nandlall’s appears incapable of any public discussion without resorting to ad hominem comments and attacks, however misguided. On this occasion, his ministry’s employee suggests that I may have read but not understood the provision of the Judicial Review Act regarding applications thereunder. He could not bring himself to think that in obtaining information for my letter on the four-year failure by the Ramson/ Nandlall team I would have informed myself of the facts regarding that Act and the Rules.

Mr Nandlall habitually looks for scapegoats to explain his increasingly exposed shortcomings and failures. On more than one occasion he has sought to blame the delay for the operationalising of the Judicial Review Act on the Rules Committee chaired by Chancellor (ag), Mr Carl Singh. It seems that neither Mr Nandlall nor his Permanent Secretary is aware that that those Rules duly signed by the members of the Rules Committee were laid in the National Assembly on November 18, 2010 as High Court Rules 2010 – No. 4 of 2010. In the National Assembly of which Mr Nandlall was a member, the Rules were described as “flawless” by Mr Ramson, the then Attorney General.

Having been laid in the National Assembly, those Rules were ready to become operational on the date of publication in the Gazette, or some later date provided. Mr Nandlall as Minister of Legal Affairs has executive responsibility for the administration of justice and it is in him and him alone that the power and duty vest to bring the Judicial Review Act into operation. Under the High Court Act the Attorney General, or his appointee, is a member of the Rules Committee, which he appears not to know! I must ask, is Mr Nandlall for real?

Even if the rules were still in draft as Mr Nandlall believes, he compounded his poor knowledge by attempting to hoodwink the public into believing that the Judicial Review Act can only be brought into force when the entire body of new Rules of Court is promulgated. And if his Permanent Secretary knew a little bit more than Mr Nandlall does about administration she would have told him that all that is required is for the justice administration to lift from the new rules the relevant Part 47 comprising three pages of twelve paragraphs and publish that part separately.

That is not unusual. There are several recent precedents for the making of subsidiary rules or legislation for specific legal purposes including:

– The rules establishing the Commercial Court and setting out the procedures for the operation of that court;

– The Practice Direction Rule establishing the Constitutional Division of the High Court; and

– The Family (Proceedings and Procedures) Rules 2012 comprising 130 pages. Parenthetically, Mr Nandlall or his Permanent Secretary may wish to explain honestly why more than two years after the publication of the Family (Proceedings and Procedures) Rules, and even longer after the completion of the building to house the Family Court, that court has still not been established.

It is not that Mr Nandlall thinks it is easier to bring up rules of 130 pages than it is rules of three pages; it is that he is afraid to bring the Judicial Review Act of 2010 into being because it would facilitate legal challenges to the executive’s excesses and breaches of administrative law. It would give to the High Court the power to grant aggrieved citizens injunctions and declarations more easily than are available under the current rules.

Finally, in my view Mr Nandlall has taken the administration of justice to its nadir. I truly hope for the sake of this country that it does not get worse, although with Mr Nandlall and Ms Anandjit I am not confident.