Business Page – January 14th, 2001

THE PRESIDENT, TAXATION AND RESIDENCE

Introduction

The Presidency of Guyana is not usually associated with taxation. In the days of old when we had governors their official emoluments were exempt from tax in the colony. Of course, in the obvious absence of a Double Taxation Agreement between the Mother Country and therefore the child, the emoluments were taxed in the UK of which the Governor was a citizen.

As we moved to independence with a Governor General the privilege followed the constitutional change and this was adopted for the Executive Presidency as well. The first holder of this position was of course Mr. Forbes Burnham who was not prepared to take the job on terms any less favourable than those available to his predecessors and perhaps could not bear the thought of submitting himself, via tax returns, to lesser subjects. This provision was not among the changes to the presidency passed recently in Guyana. Leaders in the UK, including the Queen, enjoy no such tax exemption and are liable to tax like any other subject.

Constitutional Amendments

The recent amendment seeks to establish a residency requirement on presidential candidates. It provides that in addition to being a citizen of Guyana and a Guyanese by birth or percentage, the person must have been continuously resident in Guyana for at least seven years prior to the date of nomination.

Absence from Guyana to seek medical attention, or studying at a University for not more than four years or in the employment of the Government of Guyana is disregarded for the purpose of the qualification. In other words, the period would be counted as being part of the “continuous residence”. Mr. Asgar Ally, in an interview on Plain Talk to be broadcast at 12.30pm today on Channel 6, expressed the view that residence abroad by a political leader in gainful employment (which does not come easily to him in Guyana) should not count as a break in residence.

In addition to the political arguments, including accusations about creating second class citizens, there has also been some interesting technical discussion in the press about the interpretation of the provision. At some point, no doubt, someone will want to approach the Courts which bear responsibility for interpretation of all laws.

Some References

One source which may be sought for guidance is the Guyana Citizenship Act Cap. 14:01 which, in setting out the qualifications of a Common Citizen to be registered as a citizen of Guyana, requires that that person be “ordinarily resident” in Guyana.

According to a Stabroek News article of January 6 2001, legal sources have suggested that the Court definition of “ordinarily resident” will be used in the interpretation. Business Page would not dare to question, yet alone challenge, legal sources but it would be interesting to see whether the courts in Guyana regard as similar “ordinary residence” and “continuous residence” - two issues that are extremely common in tax cases. Certainly the courts in other jurisdictions have not taken such an emphatic position.

We now turn our attention to this issue with reference to taxation specifically.

The Importance of Being Resident

Residence in taxation is of great importance because this often determines the taxability of income and assets. As a general rule, a resident is taxable on income derived from all sources, i.e. from Guyana and abroad, except that in the case of earned income arising outside of Guyana only the amount remitted to Guyana is taxable in Guyana.

On the other hand, “any person who is in Guyana for some temporary purpose only and not with intent to establish his residence therein and who has not actually resided in Guyana” for a period of up to six months is only liable to tax on income arising in Guyana. Taxability of his other income would normally be guided by the tax laws of the country of which he is resident.

Definition

There are two limbs to the definition of residence - a) Either permanent, or an intention to take up permanent residence, or b) Resident in Guyana for more than 183 days which is a more practical, objective measure.

“Resident” is also defined in tax treaties to which the country is a party. The definition may not be identical to those in the national tax laws. For example, “resident” in the Caricom Double Taxation Treaty is defined as “any person who under the law of that State is liable to tax therein by reason of that person's domicile, residence, place of management or any other criterion of a similar nature”.

As the Courts like to say, residence is a question of fact. There is no legal definition of residence and the dictionary definition “to dwell permanently, or for a considerable time, to have one’s settled or usual abode, to live in particular place” is quoted in just about every tax case and textbook.

Usually there is no difficulty in determining where a person resides (i.e. the tax jurisdiction). Once that is ascertained, he is no less resident there because he leaves it from time to time for business or pleasure. English law, as does the Guyana Act, refer to “ordinarily resident” which Viscount Cave in the Leverne Case remarked “ordinary residence connotes residence in a place with some degree of continuity and apart from accidental and temporary absences”. It has been stated that “ordinary residence” connotes some habit of life and is to be contrasted with occasional or temporary residence.

Lifestyle

It is not necessary that a person should reside in any particular structure and a nomad wandering within the confines of one country resides in that country. An American citizen who lived for twenty years on a yacht anchored within a few yards of English shore was held to be residing in the UK. The cases appear to indicate that if a person maintains a home in a country, although he may be absent there from, or if, on the facts, he spends part of the year in that country as part of his regular order of life and not merely in the course of travel, he will he held to be resident there.

Another English concept, copied perhaps a little loosely in our Act, is that of domicile. I say loosely because it is difficult to see the relevance in which it is applied under the other provisions of the Act. It is well established that a person can be resident in two or more places but a person can only have one domicile. Domicile is distinct from residence and is the country in which a person has or is deemed to have his permanent home. It is the place in which he intends to return to live permanently and pass his final days.

Resident or Ordinarily Resident

The difficulties involved in ascertaining whether a person is resident or ordinarily resident in a country in certain circumstances are well brought out in the judgment of Viscount Sumner in Levene v. I.R.C - “the words ‘resident in the United Kingdom,’ ‘ordinarily or otherwise,’ and the words ‘leaving the United Kingdom for the purpose only of occasional residence abroad,’ simple as they look, guide the subject remarkably little as to the limits within which he must pay and beyond which he is free. This is more likely to be a subject of grievance and to provoke a sense of injustice when, as now is the case, the facility of communications, the fluid and restless character of social habits, and the pressure of taxation have made these intricate and doubtful questions of residence important and urgent in a manner undreamt of by Mr. Pitt, Mr. Addington or even Sir Robert Peel. The legislature has, however, left the language of the Acts substantially as it was in their days, nor can I confidently say that the decided cases have always illuminated matters. …. The way of taxpayers is hard and the Legislature does not go out of its way to make it any easier.”

The Australian Situation

The Australian Act has some additional statutory tests set out in its definition section. The Board of Review in that country pointed out that the additional tests must be seen as enlarging and not restricting the definition of resident.

The Australia laws which ours in Guyana reflect, provide for the following additional statutory tests: ü A person’s domicile which could be of origin which English law attributes to each individual at birth, domicile of choice or domicile by operation of law. Domicile of choice may be acquired by marriage and migration. A person’s domicile is the place which by law is considered to be his permanent home or place of abode. ü Permanent place of abode was referred to by Lord Campbell in R v. Hammond where he said: “A man’s residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression”.

Under the second statutory test a person is deemed a resident if he has actually been in Australia, continuously during more than one half of the year. This is also the case in Guyana.

The third statutory test would capture a contributor to a super-annuation fund under that country’s Super-Annuation Act.

Conclusion

As a practical matter the Guyana Court may use the acid test of the income and property tax returns. It would be hard for a person to say he has resided continuously in the country for seven years and has not filed tax returns. While filing of returns, or more accurately, the filing of correct tax returns, does not seem in Guyana to disqualify persons from high office or influential positions, a presidential aspirant must surely have demonstrated by his compliance, a knowledge and his commitment to the laws of the land.

There seems to be no real basis for some of the sinister motives being attributed by some of the measure’s critics. Now that the provision has been enacted it is up to the Courts to interpret it. Different judges may take different approaches and particularly on social and political issues may be more liberal than they otherwise might be. Whether for example they should consider contractual employment outside of Guyana to earn a living as a break in continuity, as they perhaps should, only time will tell. More importantly, whether our political culture, which is considered by many to be a hindrance to economic progress, will change, is the real issue.