Court dismisses bid to thwart tax disclosures


Tribune Business Editor

A Bahamas-domiciled company has been ordered to supply tax information to the Mexican authorities by October 15, 2021, after its legal challenge was dismissed by the Court of Appeal.

TGO Ltd, previously known as Texas Gas & Oil, had sought to exploit a legal loophole in challenging the Ministry of Finance’s Notice that it must hand over “bills of sale” and other documents relating to the sale of gas and other fuel/energy-related products to a Mexican firm.

It argued that the notice issued by the Ministry of Finance stipulated that Mexico had met “all the necessary requirements” for tax information to be exchanged under the International Tax Co-operation (Amendment) Act 2013. However, the “all the necessary requirements” reference is included in the main International Tax Co-operation Act 2010, and not the 2013 amendment.

As a result, TGO Ltd and its attorney, Metta MacMillan-Hughes of Lennox Paton, asserted at the Supreme Court level that this rendered the Ministry of Finance’s notice “an error of law”, and meant then-deputy prime minister and minister of finance, K Peter Turnquest, had engaged in an “unlawful” use of his powers.

Justice Indra Charles, though, rejected TGO Ltd’s position as “unmeritorious” by finding that Mr Turnquest had complied with the 2010 Act and “did not misuse his discretion” in finding that all requirements under the 2010 Act had been met. She described the notice’s reference to the 2013 amendment as “a simple procedural inadvertence” by the Ministry of Finance, and said this did not mean the minister failed to comply.

Dissatisfied with the outcome, TGO Ltd appealed Justice Charles verdict to the Court of Appeal. The latter’s September 14, 2021, ruling disclosed that TGO had applied for - and been granted - two extensions to the deadline for responding to the tax information request.

The initial notice, issued on July 15, 2019, by acting financial secretary, Marlon Johnson, directed TGO to produce the documents requested by Mexico within 28 days, effectively setting an August 16, 2019, deadline. TGO first sought an extension until September 30 that year, which was granted by the Ministry of Finance.

A second extension was requested on September 23, 2019, seeking that the deadline be moved back to December 15, 2019. “The reasons given were that TGO Ltd’s office premises was damaged during Hurricane Dorian, as well as family and staff members were also affected by the same,” the Court of Appeal said.

The Ministry of Finance granted the extension, but only until November 5, 2019, as the Mexican authorities wanted the requested documents within 90 days. That same day, TGO launched its bid for a Judicial Review of the Government’s document production request under its international tax information exchange obligations.

TGO Ltd, whose registered office is listed as the third floor of the Bahamas Financial Centre on Charlotte Street, downtown Nassau, appears to be in the business of trading gas and other fuel and energy-related products. Given the reference to Dorian-related damage, it is likely to have been based in Freeport, although this newspaper was unable to track down an address.

Among its grounds of appeal was why the bills of sale and other details sought by the Mexican authorities could not have been obtained from Zeta Gas Del Pacifico, the Mexican taxpayer, given that it possessed these as a result of purchasing TGO Ltd’s products.

The latter suggested the failure by the Ministry of Finance to address this indicated the Mexicans had not fulfilled their obligation “to pursue all means available... in its own territory to obtain the information requested”.

The Court of Appeal, though, found that TGO Ltd’s delay in filing an appeal was “inordinate and the reasons unacceptable”. It added that the request for an extension of time was filed on September 14, 2020, well after the Court of Appeal’s registry re-opened on May 1, 2020, and excuses relating to attorney workloads were unacceptable.

As for TGO Ltd’s prospects of success, the Court of Appeal noted that Justice Charles had urged the Ministry of Finance to be more careful in the language it used despite finding that the reference to the 2013 amendment - instead of the 2010 Act - was “a simple procedural inadvertence”.

“Having found in favour of the minister, I hope that in future the Competent Authority will strive to be perfect so as to reduce challenges of this nature, and so that precious judicial time could be better spent,” Justice Charles said.

“The minister, being the successful party, will be entitled to costs but I will make no such award because if the minister had done things properly from the inception this unfortunate situation would not have arisen.”

However, the Court of Appeal backed Justice Charles’ ruling and found that TGO Ltd had little chance of success. It found that the delay in providing the documents was “substantially prejudicial” to the Government, and ordered that they be handed over by October 15.