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Local News>Carreras fights on in tax squabble - Hopes to reclaim $1.7b from TAADSusan Gordon - Business Reporter |
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Cigarette distributor Carreras Limited has petitioned the appellate court in the hope of reclaiming $1.73 billion in taxes and penalties it paid over to the Taxpayer Audit and Assessment Department (TAAD) following a near five year legal battle that it lost in the high court.
Carreras, headed by Michael Bernard, has remitted a total of $2.28 billion to the Commissioner of Taxes last year, but is not seeking to reclaim the transfer tax portion of $547.5 million.
Its appeal to have the Revenue Court's judgment set aside was filed last Decem-ber, with Carreras, whose annual turnover is about $7 billion, noting in its most recent earnings report that the action was based on the advice of its lawyers, later identified to the Financial Gleaner as Myers Fletcher and Gordon.
Ought To Be Discharged
Carreras in a note to its December 2007 earnings report said its lawyers were "of the view that there is no proper basis in law for the assessment and it ought to be discharged."
Consequently the company has accounted for the $1.73 billion as 'taxation recoverable' on its balance sheet at December 2007.
Without that entry, Carreras net assets would have declined further - it fell from $7.6 billion at December 2006 to $7.3 billion at financial yearend March 2007 - instead, the company recorded a half a billion gain on its balance sheet in its first nine months to December.
Within the same period, however, Carreras's profit was spectacular at $2.8 billion, compared to $1.98 billion in the first nine months of 2006, based on a $1.4 billion growth in revenues in the current period.
The company, in the winding up of Cigarette Company, had made provisions for the judgment.
The Financial Gleaner understands that no date has yet been set for the appeal to be heard. Carreras, a listed company which is majority owned by British American Tobacco of the United Kingdom, this week declined to comment on the matter.
In 2004, the TAAD had assessed the Cigarette Company of Jamaica, now defunct, as owing $5.7 billion - $2.17 billion in taxes and $3.54 billion in penalties - saying certain transfers made to parent Carreras between 1997 and 2002 were dividends or distributions and therefore taxable, and not loans as booked by the company.
The court eventually ruled in favour of TAAD in October, but in a pyrrhic victory Carreras held that while the $2.17 billion was due and payable, the penalty should be capped at 5.0 per cent or about $108.6 million.
TAAD chose to apply the maximum penalty, though the court had given it the option of waiving all or a portion.
Carreras honoured the judgment within the 30 days stipulated, but filed its appeal immediately after.
susan.gordon@gleanerjm.com