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Gov't could face lawsuits for proposed customs fees

Published:Friday | March 30, 2012 | 12:00 AM

Daraine Luton, Senior Staff Reporter

A TECHNICAL review group in the Ministry of Finance has warned the Government that traders could threaten to file lawsuits against the State if it seeks to implement a customs administration fee (CAF) at the ports.

The Green Paper on tax reform has proposed that the Government implement a CAF, inclusive of the customs user fee (CUF), processing fees, an environmental levy and the standards compliance fee.

The technical group, which comprises members of the Tax Policy Department in the Finance Ministry, in a report prepared for the special select committee on tax measures, said, "Any reform of the existing regime must be done with the view to bring it into compliance with the rules and regulations governing the application of such fees."

Temporary increase

The group said if the Government decides to continue with the CAF reform as proposed during the consultations with the private-sector stakeholders, an agreement should be brokered to implement a temporary increase in the rate in the new fiscal year.

"This sort of dialogue will be necessary to stave off or minimise the threat of legal action, which we believe is a real possibility," the tax policy team said.

At the same time, the technical team said the Government should be cognisant of the fact that the CUF "is under great scrutiny locally, regionally and internationally".

The team said: "These factors militate against the sustainability of the CUF as a source of government revenue into the medium to long term. The Government, therefore, must begin to think of ways of reforming the CUF with a view, of course, to preserving the revenue source."

Legal challenge

The caution to reform the CUF comes on the heels of a legal challenge mounted by multinational oil giant Chevron against the Government of Jamaica.

Chevron, in a J$600-million lawsuit, is claiming that the CUF is a tax and that is unconstitutional, since it was imposed by the minister of finance and not Parliament.

In its report to the tax committee, the technical group said, "Any change to the regime could increase the level of scrutiny and raise flags, most importantly within the CARICOM region and within the local jurisdiction.

"There is legal recourse to be had by traders were they to make a claim against the Government with respect to the application of the CUF, as well as the proposed CAF (as evidenced by the matter that was heard in the local courts with respect to the application of the CUF)."