Inland Revenue to go after Unicomer for full $20 million taxes owed

Unicomer St. Vincent Ltd., parent company of Courts Furniture Store, is expected to be served with notice very soon from the Inland Revenue Department (IRD) demanding that the over $20 million in outstanding taxes be paid.

The government’s position was validated following a ruling by the Eastern Caribbean Court of Appeal last week which ruled in favour of the tax collection entity that they were in fact owed $12.66 million following an audit of the company finances in 2015.

Comptroller of the Inland Revenue Department, Kelvin Pompey, said that more than enough time had elapsed, with numerous judicial bodies, affirming the Department’s assessment of the company’s accounts.

“Given that the Income Tax Act, whether you object or appeal the judgment, the taxes are still due. To date we have given, in our opinion, sufficient time to comply with this particular provision of the legislation. Given that they have essentially lost four times at different levels in the judicial process, we think that at this point the demand for the payment of the taxes would be in the best interest of all parties,” Pompey told SEARCHLIGHT in an interview.

From an audit conducted in 2015, the assessment stood at $12.66 million, and has since increased to over $20 million inclusive of taxes, interests and penalties.

The audit was done for the years 2007 to 2011 and the Comptroller explained that certain “anomalies” were discovered in the company’s accounts. The reason for the increased tax assessment for Unicomer was based on the company’s treatment of its Credit Protection Insurance (CPI), hire-purchase profits and royalties.

The 24-page judgment from the Appellate Court states that,  “the Comptroller claimed that the audited financial statements indicated that CPI premiums were paid to Canterbury as a related party…”.

The Department argued that these payments were subject to withholding tax under section 66 of the Income Tax Act (ITA). Canterbury is a non-resident company registered in Bermuda, and over a period of eight years received CPI payments from Unicomer “in the absence of any contract of reinsurance between the two parties”.

“The appellant did not engage Canterbury as a reinsurer. The reinsurance was between United and Canterbury. Thus, there is no basis to find that the CPI payments attract the exception provided for in the third schedule of the ITA,” the judgement outlined.

The argument of what should be considered revenue for the purpose of taxation was raised by counsel for the defense. They argued that while under the United
Kingdom taxation laws
there is provision for the
statutory justification for profits to be adjusted specifically for the purpose of assessing income tax, there is no equivalent provision in the income tax legislation of St. Vincent and the Grenadines. They claimed that under the Act the Comptroller is required to undertake a two-pronged assessment, “…whether a commercially recognised system of accounting other than a cash received basis is regularly followed; and if yes, secondly, when is that income credited, or should be credited in the books of account of the taxpayer”.

The assessments were disputed by Unicomer, initially with the Department Objections Unit and the decision given in favour of the Comptroller. A subsequent appeal was put before the Income Tax Commissioners of Appeal, and the ruling also stood in favour of the Comptroller. It was then challenged in the High Court and the judgment was once again in favour of the Comptroller. The matter was heard in the appellate court of the Eastern Caribbean in January, and on April 17, the Court dismissed Unicomer’s appeal.

The Comptroller said that Unicomer, despite raising objections about the tax assessment, should have accounted the outstanding monies in their expenses.

“I expect that any prudent company with their accountants and auditors, would have the necessary provisions in terms of their contingent liability because once you know there is an expense that might crystalize in the future…the accountants should have made provisions for it. The company should have been setting aside the necessary cash resources to make, if not full, at least substantial payments,” Pompey told SEARCHLIGHT.

Unicomer, in a statement, revealed that they will be taking the matter to the Privy Council stating, “We firmly believe, based on specialist tax and legal advice, that we have fully complied with all tax regulations in Saint Vincent.”