The PriceSmart Decision – A Small Step for Jurisprudence, a Giant Leap for Jurist-Practice

“… systemic delays in receiving tax refunds remain one of the most important issues and biggest challenges facing taxpayers today. Prior to the PriceSmart Decision, being “proactive” for a taxpayer meant sending letters and emails to the Revenue in order to request an update on the status of their refund…In light of the PriceSmart Decision, however, it is clear that there is now recourse, a remedy and recompense …”

In a recent decision of Justice R. Rahim, PriceSmart Clubs (TT) Ltd and The Board of Inland Revenue CV2019-01898 (the “PriceSmart Decision”), the Court held, amongst other things, that the Board of Inland Revenue (the “Revenue”) failed to make a decision on the taxpayer’s application for a repayment of tax pursuant to section 90(1) of the Income Tax Act, Chap. 75:01 (the “ITA”) within a reasonable time and, accordingly, Rahim J. issued an order obliging the Revenue to take immediate corrective action.

The Small Step

From the perspective of the jurisprudence, the PriceSmart Decision is merely the next step in the development of the law following two decisions of the Tax Appeal Board (the “Appeal Board”) that preceded it. One is JAVC v Board of Inland Revenue Tax Appeal nos V7-10 of 2017 (“JAVC”), and the other is Sagicor v Board of Inland Revenue Tax Appeal nos I97 of 2013 (“Sagicor”).

In JAVC, the Appeal Board clarified where the territorial limits of its jurisdiction lay. Prior to this demarcation, many taxpayers, lawyers and accounting professionals were of the erroneous impression that if the matter involved “tax”, the Appeal Board was the only forum effectively available to ventilate the dispute. In Sagicor, the Appeal Board provided useful dicta on the criteria to apply for a repayment of overpaid tax.

Given that the Appeal Board has no authority to hear a matter concerning a failure of the Revenue to make a decision in respect of the overpayment of taxes, because it is not, inter alia, a decision on an objection (refer to JAVC), it was clear that this was a proper matter for the High Court to consider on a judicial review application. Accordingly, in PriceSmart the Revenue did not vigorously oppose the contention that the High Court had jurisdiction to resolve the issue between the parties.

Consequently, the primary focus of the parties’ legal submissions – and subsequent reasoning of Rahim J. – concerned the manner in which the Revenue treated (or failed to treat) with the taxpayer’s application for a repayment of overpaid taxes.

In the specific circumstances, the Court held that the Revenue’s failure to decide on the taxpayer’s repayment application within 2 years was unreasonable. Rahim J. also emphatically rejected the Revenue’s contention that the three-year timeframe that is applicable to section 89’s “assessments” should also apply to section 90 of the ITA’s “repayment applications” for the following reasons:

“5. Section 89 treats with cases in which there has either been no assessment or to put it in simple terms an underassessment, in other words, in the case where the Board’s assessment resulted in the taxpayer being assessed to pay less tax than he should in fact pay. It does not provide for the case where the taxpayer pays more tax than that which he ought properly to pay. That section, namely section 90 stands separate and apart from section 89 both in purpose and intention. Such a process is termed an additional assessment. It can be inferred that this is so for good reason as the name suggests that the purpose of the assessment is to recover sums in addition to that which has already been assessed.

6. Section 90 however treats with repayment of taxes paid over that which should have been payable to the taxpayer and provides for a claim to be made by the taxpayer within 6 years from the end of the year of income. Pursuant to such a claim, the Board issues a certificate and upon receipt of that certificate the Comptroller of Accounts causes the repayment to be made. The section does not provide for a re-assessment or a new assessment…

…

24. … section 89 is specific to the types of matters referred to therein and this is not one such matter. Additionally, should the legislature have considered that the very period of three years ought to apply on an application for repayment, it would have said so in the legislation.”

Concerning the criteria for submitting a valid repayment of overpaid tax application, Rahim J. affirmed the dicta of the Appeal Board in Sagicor that it may be done by way of a letter explaining the basis for the refund. There is no requirement that the taxpayer file an amended return.

The Giant Leap

As explained above, and against the specific background of the JAVC and Sagicor decisions, the PriceSmart Decision is a small incremental step in the development of tax jurisprudence. However, it is the view of the authors that the PriceSmart Decision represents a giant leap for both tax practice and procedure in Trinidad and Tobago (“T&T”), and the wider Caribbean region.

Specifically, systemic delays in receiving tax refunds remain one of the most important issues and biggest challenges facing taxpayers today. Prior to the PriceSmart Decision, being “proactive” for a taxpayer meant sending letters and emails to the Revenue in order to request an update on the status of their refund. To say that it is common for such communiques to fall into the black hole of public sector non-responsiveness is to significantly understate the position. In light of the PriceSmart Decision, however, it is clear that there is now recourse (judicial review), a remedy (“mandamus”¹) and recompense (costs).

Furthermore, prior to the PriceSmart Decision tax jurisprudence in T&T has, in practice, been the exclusive domain of the Appeal Board.

There are currently a multitude of cases before the Appeal Board, but there are only three members to hear and determine all the cases, inclusive of minor procedural issues that do not go to the substance of the dispute between the parties.

Given the sheer weight of this caseload on the shoulders of just three men (albeit three very learned and experienced men) it really should be of little surprise that: (i) a tax matter that is considered to have progressed “efficiently” will nonetheless have gestated in the court system for at least a year before a trial is heard; and (ii) a decision on the matter often takes at least as long as that to be delivered thereafter.

Moreover, an Order from the Appeal Board does not come with a prescriptive timeframe obliging the Revenue to take any specific action in order to give effect to the decision, nor will the Appeal Board award costs except in the most exceptional circumstances, because the default rule pursuant to section 8(6) of the Tax Appeal Board Act, Chap. 4:50 is that:

“Except so far as may be provided by rules of the Appeal Board, the Appeal Board shall not have power to order the payment of costs by the Board of Inland Revenue or other respondent by the appellant.”

By way of contrast, there are 35 judges of the High Court and 20 High Court masters in T&T. Consequently, the PriceSmart judicial review application was able to be filed on May 3^rd, 2019; the trial was able to be heard on October 9^th, 2019 (i.e. 5 months later); and the decision was delivered on October 17^th, 2019. What is more, the taxpayer received costs, and the Revenue was mandated by Order of the Court to take corrective action within 2 weeks thereafter (October 31^st, 2019).

This is a game changer.

We look forward to seeing what the next step in the development of T&T tax jurisprudence will be, because the PriceSmart Decision is evidence that things are moving in the right direction.

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CAVEAT

The views expressed in this article are the views of the author(s) only and shared for discussion and information purposes only; they are not intended to constitute legal advice. Readers are encouraged to consult with their professional advisors for advice concerning specific matters.

Trinidad and Tobago Tax Amnesty 2019

A welcome opportunity for taxpayers to wipe the slate clean before the implementation of the Trinidad and Tobago Revenue Authority (or is it just a tried and tested method for the T&T Government to generate Revenue before an election?)

The Miscellaneous Provisions (Tax Amnesty, Pensions, Freedom Of Information, National Insurance, Central Bank, Companies And Non-Profit Organisations) Bill, 2019 was assented to on 25th June 2019.

This Act includes a provision for another tax amnesty (the “Amnesty”) for the period 15 June to 15 September 2019, and waives the following:

(a) interest on any outstanding tax due and payable for the years up to and including the year ending 31^st December 2018, where the tax is paid prior to or during the prescribed period;

(b) outstanding interest charged on any outstanding tax due and payable for the years up to and including the year ending 31^st December 2018, where the tax is paid prior to or during the prescribed period;

(c) all other penalties due and payable on or in respect of any tax or outstanding tax or interest for the years up to and including the year ending 31st December 2018, where the tax is paid prior to or during the prescribed period;

(d) all penalties on any outstanding return for the years up to and including the year ending 31st December 2018, where the return is filed prior to or during the prescribed period; and

(e) all penalties with respect to any return for the years up to and including the year ending 31st December 2018 and filed prior to 15^th June 2019, where such penalties have not been paid.

The Amnesty applies to the following taxes: –

Corporation Tax;
Business Levy;
Green Fund Levy;
Income Tax;
Petroleum Tax;
Supplemental Petroleum Tax;
Unemployment Levy;
Financial Services Tax;
Hotel Accommodation Tax;
Insurance Premium Tax;
Health Surcharge;
Property Tax;
Stamp duty;
Online Purchase Tax; and
Value Added Tax.

The Honourable Minister of Finance (“MoF”) has stated that the purpose of the Amnesty is to enable the ‘soon to be established’ Trinidad and Tobago Revenue Authority (“TTRA”) to start with a clean slate.

The MoF urged taxpayers to take advantage of the Amnesty on the basis that that there would not be another Tax Amnesty after the TTRA comes on stream. The joint select committee report and amended legislation to bring the TTRA into force are expected to be laid before parliament soon.

The MoF has set a target to raise approximately TT$500M from this Amnesty, stating that the last tax amnesty generated TT$750M.

In the last ten years there has been four tax amnesties. The Amnesty provides another welcomed opportunity for taxpayers who have not yet paid all of the outstanding taxes up to and including the last tax year.

Jurisdiction and Judicial Review in Caribbean Tax Jurisprudence

A recent decision of the Trinidad and Tobago Tax Appeal Board reveals the limited scope of its jurisdiction to adjudicate on matters of interest to taxpayers, and raises legitimate questions whether Judicial Review to the High Court is an under-utilized remedy in Caribbean tax jurisprudence.

Background

In JAVC Limited v. the Board of Inland Revenue (“JAVC Limited”), the issue for the Tax Appeal Board (the “Board”) was whether it had jurisdiction to hear an appeal where the taxpayer implored it to find, inter alia, that it was improper for the Board of Inland Revenue (the “Revenue”) to commence enforcement proceedings against it founded upon a VAT assessment that had been superseded and / or discharged as evidenced by a subsequently dated VAT Clearance Certificate which stated:

“[The Appellant] has to date discharged all obligations and paid all taxes due under the provisions of the Value Added Tax Act, Chapter 75:06”

The triggering point for the Notice of Appeal was the taxpayer’s receipt of a letter from the Revenue indicating the commencement of collection proceedings in relation to the superseded and / or discharged assessment.

The Ruling

The Board is a Superior Court of Record established by the Tax Appeal Board Act, Chap. 4:50 (the “TAB Act”) to provide for appeals from assessments to income tax, corporation tax and other taxes.

Although in the Board’s reasons it acknowledged “the cardinal principle of natural justice which establishes the right of a taxpayer to challenge an assessment made upon it through the dispute resolution mechanism as specified with the tax legislative regime before the [Revenue] may undertake appropriate proceedings for the recovery of outstanding tax liabilities”, it nonetheless ultimately concluded that its jurisdiction was constrained by section 3(4) of the TAB Act as follows:

“38. In our examination of the question as to whether the instant appeals were filed in accordance with the provisions of section 3(4) of the Tax Appeal Board Act, Chap. 4:50, we begin by considering the scope of the particular section which provides: –

‘(4) The Appeal Board shall have jurisdiction to hear and determine –

(a) Appeals from the decision of the Board of Inland Revenue upon objections to assessment under the Income Tax Act;

(b) Appeals from such other decisions of the Board of Inland Revenue as may be prescribed by or under that Act;

(c) Such other matters as may be prescribed by or under this Act or any other written law.’

39. The section therefore establishes that the jurisdiction of the Tax Appeal Board relates to appeals from either the decision of the [Revenue] upon its determination of an objection or a decision of the [Revenue] in which the appeal process to the Tax Appeal Board is prescribed such as for example, where the [Revenue] has made a decision not to extend the time to a taxpayer for lodging an objection to an income tax assessment or to cancel the VAT registration of an aggrieved VAT registrant.” [Emphasis Added]

The decision further reveals that not only does the Board have limited jurisdiction to adjudicate in disputes between taxpayers and the Revenue, but it also takes a very restrictive view on what constitutes a “decision” for the purposes of section 3(4) of the TAB Act. Specifically, the Board also held

“44. C. The communication which the Appellant has relied on as the decision of the [Revenue] upon which its Notices of Appeal have been founded, being the letter of the [Revenue] dated 22^nd March 2017, is in our opinion not a letter in which the [Revenue] has made a decision but amounts to a notice in which the [Revenue] has communicated to the Appellant its intention to commence enforcement proceedings against it as it relates to its outstanding tax liability …”

The Board did not elucidate the legal distinction between a “decision” and a “notice of an intention to [take an action]” for the purposes of the TAB Act. In lieu of an explanation, we assume the Board is unlikely to view correspondence that is unilaterally issued by the Revenue to the taxpayer as a “decision” – even though such correspondence or notice may be indicative of the fact that a number of underlying decisions had been made prior to its issuance. Presumably, as a matter of form, the Revenue’s correspondence must be expressly referable to a specific request made by a taxpayer in order for the Board to consider it to be a “decision”.

Implications

This decision of the Board is a very useful precedent from the perspective of a tax practitioner. Specifically, the borders of the Board’s jurisdiction – unless and until subsequently redefined by statute or a higher court – are now clearly delineated. The Board deals, fundamentally, with (i) appeals following a decision by the Revenue in respect of an objection and (ii) other specific (and limited) areas listed in legislation that expressly confer a route of appeal to the Board. But where the taxpayer’s contention with the Revenue does not fit neatly into the “assessment-objection-appeal” conveyor belt, then the Board is not the appropriate arena for adjudication. So, for example, in circumstances that the taxpayer alleges that the Revenue’s conduct is in breach of certain principles of natural justice, or where the Revenue prohibits taxpayer from filing a Tax Return, or where the Revenue has not paid interest on an outstanding VAT refund in accordance with the VAT Act, or where the Revenue refuses to waive interest or penalties (to name just a few of the myriad of issues taxpayers in T&T routinely face), the appropriate judicial forum to obtain recourse may not be the Board.

Alternatively, section 5(1) of the Judicial Review Act, Chap 7:08 provides that an application for judicial review of a decision of an inferior Court, tribunal, public body, public authority or a person acting in the exercise of a public duty or function in accordance with any law, shall be made to the High Court in accordance with this Act and in such manner as may be prescribed by Rules of Court.

In Preston v Inland Revenue Commission, [1985] AC 835 (House of Lords) it was stated that:

“Judicial review is available where a decision-making authority exceeds its powers, commits an error of law, commits a breach of natural justice, reaches a decision which no reasonable tribunal could have reached, or abuses its powers. Judicial review should not be granted where an alternative remedy is available. In most cases in which the commissioners are said to have fallen into error, the remedy of the taxpayer lies in the appeal procedures provided by the tax statutes to the General Commissioners or Special Commissioners. This appeal structure provides an independent and informed tribunal which meets in private so that the taxpayer is not embarrassed in disclosing his affairs and the commissioners are not inhibited by their duty of confidentiality. The commissioners and the tribunals established to hear appeals from the commissioners have wide knowledge and experience of fiscal law and practice. Appeals from the General Commissioners or the Special Commissioners lie, but only on questions of law, to the High Court by means of a case stated and the High Court can then correct all kinds of errors of law including errors which might otherwise be the subject of judicial review proceedings.”

In Preston, the House of Lords stated that a taxpayer can apply for judicial review of a decision of the Revenue if it failed to discharge its statutory duty to taxpayers or abused its power. For the purposes of judicial review, abuse of power included the unfair exercise of a statutory power if the Revenue’s decision or action was equivalent to a breach of contract or breach of representation giving rise to estoppel.

Given, as stated in Preston, “judicial review should not be granted where an alternative remedy is available”, does the Board’s articulation of its own limited jurisdiction in JAVC Limited now fully support Judicial Review applications of Revenue decisions directly to the High Court in circumstances that Caribbean tax practitioners had previously, and exclusively, sought recourse from the Board? We suspect that until and unless overturned, the JAVC Limited decision will help to establish a paradigm shift in Caribbean tax jurisprudence in favour of the High Court. Very interesting times are ahead.

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T&T Budget 2019: “Turnaround”

On October 1, 2018, the Minister of Finance released his Budget Document entitled “Turnaround”.

On October 1, 2018, Trinidad and Tobago‘s Minister of Finance released his Budget Document entitled “Turnaround”.

The following is a summary of the key proposed fiscal measures:

Subject	Proposed Measure	Proposed Date of Implementation
Tax Administration	Trinidad and Tobago Revenue Authority	2019 (Full benefits of reform to manifest in 2020)
Property Tax	Board of Inland Revenue to issue notices to property owners for the payment of property tax.	2019 Note: Property Tax will only be implemented and collected in respect of calendar year 2019
Agriculture	Agriculture Financial Support Programme: The provision of one-off grants for successful and approved agricultural producers with investment opportunities in a range of activities, including modern farming technology, research and product development, brand building, food safety compliance requirements, value added initiatives and energy-saving and labour-saving technology.	October 3, 2018
Fuel Subsidy	Increase the cost of super gasoline from $3.97 per litre to $4.97 per litre.	Immediately
Public Service Pension	Minimum public service pension of $3,500 per month immediately upon retirement of the public servant.	January 1, 2019
Crime Stoppers	Crime Stoppers to increase the current maximum reward from $10,000 to $100,000 for information on the 25 most wanted criminals as identified by the Trinidad and Tobago Police Service which will lead to the successful conviction of those persons. An overall increase in the budgetary allocation for Crime Stoppers by $2.5 million.	January 1, 2019
Remote Health Centres	Three (3) health centres located in Grand Riviere, Blanchisseuse and Cedros would remain open on a 24 hour / 7 days basis.	January 1, 2019
Penalties Under Children’s Act	An increase by 100% of all fines levied in connection with the prevention of cruelty to children as detailed in the Children’s Act.	January 1, 2019
Stamp Duty	The Stamp Duty threshold for residential property to be increased from $850,000 to $1.5 million for first time home owners.	January 1, 2019
Penalties under the Litter Act	100% increase in all penalties under the Litter Act.	January 1, 2019
Penalties for Bush/Forest Fires	Increase the fine from $1,500 to $5,000 under the Agriculture and Fires Act for committing such an offence.	January 1, 2019
Compliance with the Board of Inland Revenue		January 1, 2019
TD1	Under section 98(2)(b) of the Income Tax Act – to increase penalty/fines from $3,000 to $10,000 for submission of incorrect information of TD1s regarding fraudulent documents to support claims.
Business Levy	Under section 5A (2)(c) Income Tax Act – the threshold for a self employed individual subject to Business Levy to be increased from $200,000 to $360,000.
Fraud	Under section 119 Income Tax Act – to increase the penalty for the offences in respect of Fraud from $50,000 to $250,000.
Registration of Clubs Act	Under the Registration of Clubs Act – the rate of interest for late payment of taxes is being increased from 15% to 20%.
Food Cards	Increase the value of the Food Card: • for households with 1-3 persons: from $410 per month to $510 per month; • for households with 4-5 person: from $550 per month to $650 per month; and • for households with 6 and more persons: from $700 per month to $800 per month.	January 1, 2019
Disability Grants	•Remove the age eligibility for the disability grant under the Public Assistance Act to allow disabled under the age of 18 to access the grant. •Increase the Disability Grant for recipients 18 years and older from $1,800 to $2,000.	January 1, 2019
Public Assistance Grant	Increase the Public Assistance Grant by $150 as follows: •for 1 person from $1,150 to $1,300; •for 2 persons from $1,400 to $1,550; •for 3 persons from $1,600 to $1,750;and •for 4 or more persons from $1,750 to $1,900.	January 1, 2019
Senior Citizens’ Pensions	The cap on the Senior Citizens’ Pensions will be increased to $6000.	January 1, 2019
Tax Allowance for Tertiary Education	The allowance for tertiary education expenses will increase from $60,000 to $72,000 per year.	January 1, 2019

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Res Judicata in Tax Matters

Does a decision in one year’s tax assessment bar the Revenue or court from considering the same or similar issue in a subsequent year?

Issue

It is not uncommon for taxpayers to make decisions to treat with certain items of income and / or expense in a manner that can have tax implications spanning over a number of Years of Income. For example, if a taxpayer consistently treats certain purchases required in the furtherance of his business venture as “revenue” as opposed to “capital” expenditure – or certain property related expenses as “repairs” instead of “improvements” – then this is a potential tax exposure in successive years if the Revenue disagrees with the taxpayer’s initial classification.

In these circumstances, a question that is often raised is whether the Revenue is precluded from raising an issue in an assessment that was previously determined in favour of the taxpayer by the Court in respect of a prior year of assessment? Specifically, does the public policy and common law doctrine of res judicata, also known as estoppel per rem judicatam (or “claim preclusion” in English), which holds that a matter that has been adjudicated by a competent court may not be relitigated by the same parties, preclude the Revenue from raising the same issue on identical facts in subsequent years?

Against this background, it is noteworthy that the Tax Appeal Board is a Superior Court of Record and is subject, caeteris paribus, to the Civil Proceedings Rules, 1998 (the “CPR”). As such, the arsenal of procedural sanctions contained in the CPR that can facilitate the determination of an Appeal or issue without a trial are at its disposal.¹

Background to the Doctrine

The doctrine of estoppel per rem judicatam is based upon the following Latin maxims:

(i) interest rei publicae ut sit finis litium (“in the interest of society as a whole, litigation must come to an end“); and

(ii) nemo debet bis vexare pro una et eadem causa (“no man ought to be twice troubled or harassed if it appears to the court that it is for one and the same cause“)²

The rule – as is evident from the passage above – operates to bar a party to an action from subsequently relitigating the same cause of action or issue incidental to the cause of action where a prior decision was decided upon its merits by a court of competent jurisdiction (save by way of appeal).³

Estoppel per rem judicatam has been described as a “portmanteau doctrine” as it combines cause of action estoppels and issue estoppels. Cause of action estoppel operates where there is a complete bar to a duplicitous cause of action, and issue estoppel operates where the litigant is seeking to raise the same issue from prior final decision involving the same parties.⁴

Applicability of the doctrine in tax matters

The Trinidad and Tobago Court of Appeal in Phoenix Park Gas Processors Limited v The District Revenue Officer Couva/Caroni⁵ (“Phoenix Park”) considered the scope of doctrine in tax matters. The Court referred to the Privy Council case of Caffoor v Commissioner of Income Tax, [1961] AC 584 (P.C). prior to concluding that: “the Revenue (is not) precluded from accepting a particular interpretation of a taxing statute since neither issue estoppel nor res judicata applies to assessments to tax in different tax years” (the “Caffoor Principle”).

The Caffoor principle applied

More recently, in the case of R. v Board of Inland Revenue (“R v. the BIR”) the Tax Appeal Board gave further consideration to the question of whether the doctrine of res judicata is applicable in tax matters. On the specific facts, the issue was whether the taxpayer was entitled to claim capital allowances on the costs of assets, inclusive of the stamp duty. By way of background, the Court had previously held, in respect of prior years, that accounting standard IAS 16 was instructive in determining that the Stamp Duty incurred by the Appellant was an essential facet of the acquisition costs of the assets, and properly included in the capital allowance calculation. In the instant appeal, an issue for determination was whether the doctrines of res judicata and/or abuse of process precluded the Revenue from relitigating the same issue in the current year of income. Concerning this, the court remained pellucidly clear about the inapplicability of issue estoppel to tax proceedings: –

“having considered the totality of the factors….against the background of the applicability of res judicata and issue estoppel principles in taxation matters….we therefore hold that the Respondent was not bound in the years of income 2006 to 2008 by the previous decision of this Court concerning the year of income 2005 in the exercise of its assessment of the liability to tax of the Appellant for those years of income. For this reason, we also hold that there is also no justification to conclude that there has been an abuse of process in the actions of the Respondent in it raising an assessment on the Appellant for the years of income 2006 to 2008 despite the correlation of the underlying facts between those years with that in the previously decided matter involving the year of income 2005.”⁶

The implications of the decision

On the basis of Phoenix Park and R v. the BIR it is clear that the doctrines of res judicata and/or abuse of process cannot found the basis of a “strike out” type Application in circumstances that the taxpayer is relying on a decision of the Tax Appeal Board in respect of a prior year of income.

It is the view of the writer, however, that the taxpayer may have had more success if it sought to obtain summary judgment pursuant to 15.2 (a) of the CPR whereby the Revenue (respondent) had no realistic prospect of success on the basis that:-

(i) The instant appeal fell square and centre within the precedent established in respect of the prior years; and

(ii) The factual matrix in the instant appeal was identical to that in prior years which were subject to the earlier decision.

Specifically, whilst the court in R v. the BIR was reluctant to depart from the deeply engrained Caffoor principle, it is noteworthy that the Court also refused to depart from the rationale that formed the basis of its decision in respect of prior years, and applied the same reasoning in order to grant the taxpayer ultimate success in the instant appeal. In short, the fundamental doctrine of stare decisis et non quieta movere, which translates to “stand by decisions and not to disturb settled matters” or, more simply, cases must be decided the same way when their material facts are the same remains inviolate – no matter the area of law, or the year of assessment.

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T&T Budget 2017: Changing the Paradigm

On October 2, 2017, the Minister of Finance released his Budget Document entitled “Changing the Paradigm”.

On October 2, 2017, Trinidad and Tobago‘s Minister of Finance released his Budget Document entitled “Changing the Paradigm”.

The following is a summary of the key proposed fiscal measures:

Subject	Proposed Measure	Proposed Date of Implementation
Corporation Tax for Commercial Banks	Commercial banks will be subject to a flat 35% rate of tax.	January 1st 2018
Corporation Tax (Generally)	Companies will be subject to a new flat 30% rate of tax.	January 1st 2018
Export Allowance for the Manufacturing Sector	To re-establish export allowances to manufacturers; to establish a framework that would allow a reduction on tax for revenues generated from incremental exports to existing markets.	January 1st 2018
Energy Sector	12.5% royalty rate would be applicable on the extraction of all gas, condensate and oil. The fair market values of oil and gas will be fixed by the Petroleum Pricing Committee.	December 1st 2017
	• Making the Supplemental Petroleum Tax responsive not to price but to underlying profitability.	TBA
	• Extending the Supplemental Petroleum Tax to gas.	“”
	• Reconciling and simplifying of the fiscal regimes applicable to the exploration and production and production sharing systems.	“”
Gambling Industry	The existing rate of duty on all mechanical games of chance for gambling of 20% be increased to 40%.	October 20th 2017
	The introduction of a 10% tax on all cash winnings by the National Lotteries Control Board.	December 1st 2017
	Electronic roulette devices operating in bars throughout the country, under the Liquor Licence Act, Chap 84:10 will now attract a flat device tax of $120,000 annually.	January 1st 2018
	• The gaming tax which shall be payable annually under the Liquor Licence Act, Chap 84:10 will be increased from $3,000 to $6,000 in respect of each amusement game.	“”
	• Various taxes on gaming tables and other devices by private members’ clubs would be increased.	“”
Property Tax	The payment of Property Tax under the Property Tax Act had been waived for the period January 1st 2010 to January 1st 2016. This is to be put into effect.	2018
Tax Administration	Introduction of the Trinidad and Tobago Revenue Agency (“TTRA”). The TTRA will manage both the Customs and Tax Divisions, and will also manage its own Human Resources. Legislation to establish TTRA to be tabled before Parliament in December 2017.	2018
Vehicles using Clean or Alternative Fuels	25% increase on the motor vehicle tax and customs duty on private passenger vehicles with engine sizes exceeding 1599cc and not exceeding 1999cc. Moratorium up to December 31st 2017 for private passenger vehicles already in transit or already in Trinidad and Tobago.	October 20th 2017
	Removal of all taxes and duties on CNG vehicles with engine sizes under 1599cc.	“”
Import Duty on Tyres	Used tyres will attract the same 30% customs duty as new tyres. However, the customs duty on the importation of new tyres utilized on buses and lorries will remain at 15%.	October 20th 2017
	Environmental tax of $20.00 per tyre on all tyres imported into Trinidad and Tobago.	December 1st 2017
Fuel Subsidy	An adjustment to the subsidy plus the increase in Gross Margins will increase the price of Super Gasoline from $3.58 per litre to $3.97 per litre and the price of Diesel from $2.30 per litre to $3.41 per litre.	Immediately

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Recent Tax Case: C.G. v. The Board of Inland Revenue

The Appellant raised a previously untested point before the Appeal Board: whether a taxpayer can obtain an order for summary judgement and bring the appeal proceedings to an end prematurely without having to incur the costs and time associated with the trial process.

Obtaining an Order for Summary Judgement in Tax Appeal Cases

Background

A summary judgement is a judgement entered by a court for one party and against another party summarily, i.e., without a full trial. In the absence of an award of summary judgement (or some type of pretrial settlement), a lawsuit ordinarily proceeds to trial. This process can be costly and lengthy. A party applying for summary judgement is attempting to avoid the time and expense of a trial when, essentially, the outcome is obvious.

In Trinidad and Tobago summary judgement in the Supreme Court is governed by Rule 15 of the Civil Procedure Rules (formerly Order 14 of the Supreme Court Rules). The Tax Appeal Board (“Appeal Board”), which is a Superior Court of Record, is subject to its own rules: The Tax Appeal Board Rules, Chap. 4:50 (the “Tax Rules”). The Tax Rules do not expressly make provision for summary judgment applications; however Rule 21 of the Tax Rules provides that:

“Except as otherwise provided in the Act or in these Rules or in any written law, the Rules of the Supreme Court relating to applications to a Judge in Chambers and as to taxation of costs shall, with the necessary modifications, if any, apply to appeals and applications to the Court”.

Moreover, section 6(7) Tax Appeal Board Act, Chap. 4:50 provides that:

“The Board, as respects the… enforcement of its orders… and other matters necessary or proper for the due exercise of its jurisdiction, has all such powers, rights and privileges as are vested in the High Court of Justice…”.

The wording of this section is sufficiently wide to give the Appeal Board the power to award summary judgements.

C.G. v The Board of Inland Revenue

(Decision delivered December 1, 2016)

Material Facts

In C.G. v The Board of Inland Revenue, the taxpayer filed an application before the Appeal Board to allow his appeal, and to vacate the Board of Inland Revenue’s Assessment against him – without the delay and expense inherent in a full blown trial – on the basis, inter alia, that: the Statement of Case filed by the Board of Inland Revenue revealed, on its face, that it stood no reasonable chance of success on the Appeal.

Legal Issue

The Appellant raised a previously untested point before the Appeal Board, i.e. whether an Appellant can obtain an order for summary judgement and bring the appeal proceedings to an end prematurely without having to incur the costs and time associated with the trial process.

Held

In C.G. v. The Board of Inland Revenue, the Appeal Board confirmed that the remedy of summary judgement can be utilized at the Appeal Board and, in general terms, may be made [with necessary modifications] in the following circumstances:

“Where in an action to which this rule applies a statement of claim [Notice of Appeal] has been served on a defendant [Respondent] and that defendant [Respondent] has entered an appearance [Statement of Case] in the action [Appeal], the plaintiff [Appellant] may, on the ground that the defendant [Respondent] has no defence to a claim included in the writ [Notice of Appeal], or to a particular par of such a claim, or has no defence to such a claim or part except as to the amount of damages claimed, apply to the Court for judgement against that defendant [Respondent].”

Where questions of law are raised summary judgement is appropriate where:

1. if the defendant’s [Respondent’s] only suggested defence is a point of law and the court can see at once that the point is misconceived, the plaintiff [Appellant] is entitled to judgement;

2. if at first sight the point appears to be arguable, but with a relatively short argument can be shown to be plainly unsustainable.

Implications for tax law practice

By confirming its jurisdiction to grant summary judgements, this enables the Appeal Board to deal with its cases expeditiously and cost effectively.

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CAVEAT

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Avoiding interest on quarterly taxes in Trinidad and Tobago

In Trinidad and Tobago, interest may be avoided by a company on the payment of quarterly taxes should the required amounts be paid to the Board of Inland Revenue on or before the due dates. The due dates for the payments of quarterly taxes are 31^st March, 30^th June, 30^th September and 31^st December. The 4^th quarter for 2016 ends on 31^st December and it is important that the quarterly taxes due are correctly determined and paid on time. Should a downward adjustment be required to be made for the payment, an application should be made and approved by the Board of Inland Revenue. Interest of 20% per annum is imposed on the late payment of quarterly taxes.

Corporation tax is charged for the calendar year in which the accounting period ends, on taxable profits earned during the accounting period. Taxable profits is determined after deduction of capital allowances and the revenue expenses wholly and exclusively incurred in producing income. Corporation tax is based on 25% of taxable profits of a company.

In an income year quarterly corporation tax is based on the taxable profits of the previous year. The corporation tax payable for each quarter in 2016 is based on taxable profits for the income year 2015. The corporation tax installment payable for each quarter in 2016 is determined based on the following formula.

Taxable profits for 2015 X 25%

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Should the taxable profits for 2016 be expected to exceed the taxable profits for 2015, by 31^st December the company is required to pay to the Board of Inland Revenue, quarterly taxes equal to the liability for income year 2015 in addition to 80% of the increase for 2016 over 2015.

Should the taxable profits for 2016 be expected to be less than the taxable profits for 2015, an application should be made to the Board to Inland Revenue for approval to reduce the quarterly tax installment. A company is required to pay the higher of corporation tax or business levy.

Business levy is charged at the rate of 0.6% of gross sales or receipts of a company. A credit is given against business levy liability for any corporation tax paid for the income year, the result being that only the higher of the corporation tax or the business levy liability is payable.

Green fund levy is charged at the rate of 0.3% of gross sales or receipts of a company. Green fund levy must be paid in addition to corporation tax or business levy.

DISCUSSION FORUM

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One More Barbados Tax Amnesty – Update

This is an update to our post initially published on 21 August 2016.

Specifically, during the 2016/2017 Barbados Financial Statements and Budgetary Proposals, the Minister of Finance proposed that the Government will again offer a tax amnesty which will run from 15 September 2016 to 15 February 2017. Subsequently, the Barbados Revenue Authority has issued a Policy Note which provides details on the operation of the Tax Amnesty. Posted by La-Tanya Edwards

During the 2016/2017 Barbados Financial Statements and Budgetary Proposals, the Minister of Finance proposed that the Government would again offer a tax amnesty which would run from 15 September 2016 to 15 February 2017.

The Minister emphasized that this is expected to be the last tax amnesty offered by his Government for a while.

The amnesty covers outstanding amounts due in respect of:

• Income Tax;

• Value Added Tax; and

• Land Tax.

The waiver is applicable to penalties, interest and other charges incurred up to 14 September 2016. In order to benefit, a taxpayer must inter alia settle the outstanding tax on or before 15 February 2017. The Barbados Revenue Authority has issued the following Policy Note which provides details on the operation of the amnesty:

policy-note-2016-no-07-tax-amnesty

(download PDF here)

This amnesty is expected to collect approximately BD$15 million which is a small fraction of the BD$568 million in outstanding taxes referenced by the Minister.

DISCUSSION FORUM

In these challenging economic times, are tax amnesties like this one (and the recent one in T&T) the answer? Please leave your comments in the box below.

Trinidad and Tobago signs IGA on FATCA with the United States of America

Trinidad and Tobago’s Honourable Finance Minister Colm Imbert signed a Model 1 Inter-Governmental Agreement (IGA) with the USA on 19 August 2016.

On 19th August 2016 Trinidad and Tobago’s Honourable Finance Minister Colm Imbert signed a Model 1 Inter-Governmental Agreement (IGA) with the United States of America.

The IGA is designed to improve international tax compliance through mutual assistance in tax matters based on an effective infrastructure for the automatic exchange of information between both countries.

Pursuant to the IGA, financial accounts maintained by U.S. persons in T&T’s financial institutions will be automatically reported to the Board of Inland Revenue (BIR). The BIR will then send that information to the Internal Revenue Service (IRS) in the U.S. Reciprocally, the IRS will also provide the BIR with information pertaining to the financial accounts of T&T persons using U.S. financial institutions.

T&T and the U.S. will now move to bring the IGA into force. This will allow for the automatic exchange of information between both countries and also ensure that foreign financial institutions, including local banks and insurance companies, will not be subjected to a thirty percent withholding tax for non compliance.

“To bring the IGA into force, the Minister of Finance will take to the Parliament the necessary legislation, among other things, to provide for the automatic exchange of information by the Board of Inland Revenue to the United States Inland Revenue Service,” the Ministry of Finance stated.

FATCA was enacted in 2010 and is part of U.S. federal Law that requires foreign financial institutions (FFIs) to report information about financial accounts held by US citizens and residents to the IRS.

DISCUSSION FORUM

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