Digicel ordered to pay GCT on Hurricane Ivan settlement
Barbara Gayle, Justice Coordinator
Telecommunications provider Digicel has been ordered by the Court of Appeal to pay General Consumption Tax (GCT) on an insurance claim it received for damage to its equipment and facilities during Hurricane Ivan in 2004.
Digicel had received $429 million in the settlement and the amount was recorded in its profit and loss statement and income tax was paid on the amount at the rate of 33 and a third per cent.
In 2008 the commissioner of Tax Payer Audit and Assessment carried out an audit on its operations.
On july 23, 2008 Digicel was ordered to pay $85.8 million for GCT from the total settlement.
The Commissioner took the view that the amount received for loss of business due to the breakdown of the network during the hurricane would represent a taxable supply.
The Commissioner said if the network had not failed during the hurricane, customers would have been using the network and income would have been earned, therefore GCT would have been payable.
In February 2009 Digicel objected and the amount was reduced by $9.6 million.
There were further objections and the amount was reduced to $59 million because of a reduction in the GCT rate.
Digicel then took the matter to the Revenue Court and Justice Roy Anderson dismissed the appeal against the substance of the commissioner's decision.
However, in respect of the GCT rate, the Judge ruled that the applicable rate of tax at the material time was 15 per cent and not 16.5 per cent as the commissioner had conceded.
Digicel took the matter to the court of appeal which ruled that GCT was payable on the settlement.
The telecommunications company was objecting on the basis that the insurers settlement of its business interruption claim was not subject to GCT.
However, the court upheld the judge's ruling that it was subject to GCT and dismissed Digicel's appeal.
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