THE CIGARETTE Company of Jamaica Ltd., a subsidiary of the Carreras Group, has been assessed by the Commissioner of Taxpayer Audit and Assessment and ordered to pay $5 billion in taxes for the period 1997 to 2002.
The announcement was made yesterday afternoon and means that the Cigarette Company of Jamaica will now have to pay $2 billion in income tax and $3 billion in penalties.
This decision was based on the Commissioner treating loans from the Cigarette Company as being distributions to its parent company Carreras.
In a release issued last night to the Jamaica Stock Exchange (JSE) and the Group's stockholders, Carreras made its position clear.
"Loans from a subsidiary to a Jamaican resident parent do not come within the definition of distributions given in the Jamaican Income Tax Act. The making of loans is a regular practice in groups of companies (listed and unlisted) resident in Jamaica. Similarly, the making of loans from subsidiary to parent company is not unusual either in the United Kingdom or internationally without giving rise to adverse tax consequences. Therefore, the company does not understand why these assessments have been raised."
The company has now filed an objection to these assessments. Its lawyers are of the opinion that there is no proper basis in law for treating these loans as taxable distributions. These assessments represent $11.77 per stock unit of Carreras Group Limited.
For the financial year ended March 31, 2003, the Cigarette Company of Jamaica paid over Special Consumption Taxes of $1.4 billion, income taxes of $395 million and GCT of $640 million. Yesterday, Carreras' stock price stood at $32.70. According to its annual report, the Group currently sits on $12 billion of cash, repos and short term investments.
