Now, Carreras exhales...
CIGARETTE distributor, Carreras Group is near to receiving almost 20 per cent of the over $1.7 billion owed to it from the Tax Administration of Jamaica (TAJ).
The tax body has commenced the refund but dialogue continues for the payment timeline of the remainder, according to Carreras Managing Director Marcus Steele on Wednesday in response to shareholders.
"Rest assured that the directors and management of Carreras are working tirelessly with Government to get this money back. We prefer you to look at this in the context of the economy," he said in response to queries on the payment delay from vocal shareholder Orette Staple at the annual general meeting held at the Pegasus Hotel in Kingston. "If you look in the financials for the first-quarter you would have seen that the $1.7 billion is now reflected as $1.5 or $1.4 billion. So from the TAJ side, the business has been collecting through a negotiation done by our directors and managers."
The notes accompanying the first-quarter 2013 results state that during the quarter, TAJ commenced refunds to Cigarette Company of Jamaica (CCJ), a Carreras subsidiary (in voluntary liquidation), by issuing "offsets against the estimated tax liability of Carreras Limited in the aggregate amount of $337.5 million subject to final agreement with the TAJ and Ministry of Finance and Planning".
In other words, the first steps in the payment of the $1.73 billion plus interest owed has begun.
"The process is slow and I understand the impatience from the shareholders," he said. "As soon as we get that money back, the directors through the liquidators will have to make a decision when and how we distribute that amount."
In 2004, CCJ received assessments for income tax claimed by the tax authorities for the years 1997-2002 amounting to $5.68 billion, including penalty and interest.
CCJ appealed the assessment and on March 13, 2012, after a volley of judgments and appeals in lower courts, the Privy Council handed down its decision dismissing the appeal of the TAJ with costs to CCJ.
These costs have been taxed and recovered.
"Recovery, however, remains outstanding in respect of the amount paid of $1.73 billion, based on a lower court judgment," indicated its 2012 annual report.
Investors want the tax distribution in order to fatten dividends which are threatened by a fall-off in the core business activity of distributing cigarettes, due to the recent ban on public smoking.
Steele on Wednesday reiterated earlier comments that the ban hurt sales by 30 per cent. He however remains expectant of amendments to the ban on public smoking.
Carreras made $485 million net income in the first-quarter 2013, which represented a 39 per cent decline year-on-year.
"We are not against the regulations but we have to take into consideration the rights of both smokers and non-smokers."
Health Minister Dr Fenton Ferguson introduced a ban on public smoking effective July 15.
The fines for smoking in public spaces was initially $50,000 with a jail term of three months for a first offence.
In addition, owners of establishments could be held liable for smoking violations on their compound with fines up to $1 million.
Subsequently, Ferguson announced that some of these edicts would be amended by this month.
Steele said that Carreras's closed-door lobby was successful in removing the requirement of warnings on every stick; amending the definition of public and enclosed space; creating allowances for private residences; and reducing fines, along with the introduction of non-criminal sanctions.
Carreras, however, quietly wants additional amendments.
"We did not get all our concerns because we also had a concern on the graphic displays on all packages," he said.