As far as the Inland Revenue Department is concerned, its recent legal triumph over Unicomer (St. Vincent) Ltd. is to not be celebrated just because of the $16M plus payout that the multinational company is expected to fork over in taxes and penalties.
Comptroller Kelvin Pompey sees this victory, in part, as the high point of 8 years’ worth of internal capacity building investments. He told Asbert News Network, “We have not, over the years, been sufficiently aggressive in pursuing matters to the level of the Courts – and I’m putting in context 8 maybe 10 years ago.
“During that period, over the last 8 years or so, we’ve been strengthening our capacity and our ability to deal with non-compliance and especially when it comes to multinational corporations and these are those big companies that have branches and head offices abroad and because of the nature of their structure they present unique risks to tax authorities.
“Not just here in St. Vincent but in other jurisdictions as well. So we’ve been strengthening our capacity to address issues in terms of how they do their accounts to make sure that they are in compliance with the income tax laws of St. Vincent and the Grenadines.
“So this victory, in our assessment, is a culmination and a fulfillment in terms of a lot of the efforts and the objectives that we wanted because it demonstrates that we have the capacity now to challenge complex issues of tax law and accounting and take them to the highest forum in terms of the Appeal Court.
“Additionally we are dealing with a tax payer here – Unicomer – that has significant resources; this is not a small company. They were also able to have the best of legal minds because they were represented by Dr. [Claude] Denbow who is one of the leading [legal] tax practitioners in the region.
“He actually wrote a book on taxation in the region which is relied on… so in effect St. Vincent and the Grenadines – one of the smallest tax jurisdictions – has taken on a multinational corporation with all its resources and the best in legal minds and we’ve come out ahead. And that is because we have been working, as I said, towards strengthening, understanding the law, we’ve been revising and of course we’ve been looking at our human resources and capacity.
“Mrs. Francis, in terms of having a legal officer on board basically in house, came in specifically to assist in this process and also I think this is also a recognition that this was a wise move in having our own lawyer in house.”
Echoing sentiments voiced by the learned High Court Judge Nicola Byer, Pompey also classified the department’s first major legal win as, “a victory for the taxpayer because it demonstrates that the objection system works.
“They objected to our assessments. After that they went to the Appeal Commissioners to show that that process works and then they went to the High Court also. So it demonstrates that there is access at all levels that is available to taxpayers who wish to challenge the department’s assessments.
“And that is needed and necessary and must be emphasized because any tax department cannot be able to do what it wants given the nature of taxation. So these are all checks on the department’s ability, some would say, ‘to do weh yo want.’
“It demonstrates that the department can’t do what we want. We have to abide by certain rules and structures and the fact that we have this case that has gone all the way to the High Court demonstrates that the system is there and it is working. It worked for the department and it works for the tax payers. ”
In house counsel, Kezi Francis explained how an assessment is normally triggered. She said, “when income tax returns are submitted the Inland Revenue Department would assess the returns and if we feel that there is something that needs further probing then we would conduct an audit.
“That was done in this case, we conducted an audit and we determined what was submitted on the company’s tax returns was not in line what our legislation said. So we would have made additional assessments on the company’s tax liability and we would have communicated such to the company.”
Although Comptroller Pompey opted to remain tightlipped about the next tax delinquent in the department’s crosshairs, he did offer some advice.
He said, “we have a robust auditing program and at any given time we have, I think, over 2 or 3 dozen audits open. We have 6 auditing teams and their job is to constantly be auditing.
“We have had assessments and payments in the past from multinational corporations but we’ve settled those in house in terms of $10M and $12M and $18M settlements but they did not get the publicity because they never went through to the Courts; the tax payer decided to settle in house.
“In this instant I think the tax payer felt that they were sufficiently right or they had enough resources in order to take on the Inland Revenue Dept. St. Vincent – we’re not talking here about Courts St. Vincent; this is really a multinational company and most of what is being done and the defense of their case would come from their head offices and so forth.
“So they basically thought that they would have had a successful outcome because some of the issues that were challenged here by the income tax department were some years ago challenged by the Barbados revenue authority but there were differences – by the same company [Unicomer].
“And if I remember correctly, I think one of the company’s personnel did say to us, ‘we have won this issue in more sophisticated jurisdictions than St. Vincent,’ and we said, ‘OK bring it on.’
“Now all we will say to that is, ‘welcome to the third world.’”
Pompey is convinced that his team is even more inspired now to tackle non-complaint tax payers across the Vincentian jurisdiction.
He said, “we are emboldened. There’s no getting away from that. We see this as an indication that our strategic objectives… is bearing fruit and of course it would make us much more proactive and robust in dealing with matters of non-compliance and of course we are going along that line.
“We have, in this case, been ably assisted by outside counsel Duane Daniel. His chambers gave excellent representation on this and we would be using him essentially to assist in terms of ongoing compliance matters.”
Not only is the time spent preparing cases expected to be significantly reduced but recent amendments to the local tax act mandate a speedier communications process.
Pompey said, “I think we have moved significantly up the learning curve. I mean, there are always processes in the Court system that can delay things for one reason or the other but we’ve moved up, in terms of the department in terms of our ability to prepare cases, address issues and get the facts out of both the accounting and the income tax act.
“We are much, much, much more informed and educated now on these matters because we’ve been training our auditors not just here but overseas over the last 5 years in terms of dealing with a lot of these issues.
“So we can see the time to take other cases through to the High Court being significantly shortened from our end….”
According to Francis, the advent of the tax administration act which came into force last December, also dictates that the department responds to any challenges about its processes within prescribed timeframes.
“It really holds us accountable in terms of the time we take to issue responses and to close cases but what may account for some of the delays… even though we do assessments the window is still open for the tax payer to come in informally and to address those deficits and for us to come to some sort of amicable agreement as to what the issues are and whether or not the taxpayer would accept or if we would accept their position.
“And if we’re still at loggerheads after that coming together period then it proceeds to the Appeal Commissioners and the High Court level.”
She further warned that the Vincentian legislation provides a much lower threshold for establishing tax evasion offences. “Once a transaction has the effect of reducing a company’s [tax] liability then we can deem it as a suspicious transaction and flag it as opposed to other legislation like Barbados for example.”
There, tax fraud investigators must prove that alleged offenders intend to deprive the nation of its taxes.
In the three or so weeks that has passed since Judge Byer’s ruling, Pompey reported, the tax department’s lawyers have been in negotiation with “the company’s representatives” regarding the payment plan.
Comptroller Pompey remains optimistic that the payout is imminent. He told ANN, “we are aware that this is not a company in just St. Vincent. This is a multinational company with significant resources and this is an issue that has been going for close to 7 years and we expect by now and even since 2018 when the Appeal Commissioners ruled against the company on 3 of the issues that the company would have started to provide for and raise the necessary funds in the event that they lose at the level of the High Court.
“There are risks to litigation; consequences to going to Courts and one has to be reminded, when you go to Court – you decide to appeal a matter – that you can lose it. Therefore it means that you must basically make the necessary provision in the event that you lose.
“And we expect that this company given its significant resources within the CARICOM and the wider Caribbean region within which they operate and even internationally, would be in a position to pay the outstanding amounts to the department especially in this time when we have had a volcanic eruption, we have the COVID issue and so much other issues impacting on government’s expenditure payments like these would be quite timely.
“And so we expect that the company would do what it is obligated to do by law at this point and settle the outstanding amount.”