The Louisiana Chemical Association is not happy with their taxes. They are not alone. For only in Monte Carlo and Gran Cayman are people really happy with their tax bills.
But the problem in Louisiana is that chemical traders, manufacturers and processing plant owners across the state believe that recent changes to the tax laws specifically (and possibly unfairly) target the local chemicals industry.
Trouble began earlier in the year, when Louisiana legislators passed new laws that they hoped would fill an impending $103 million hole in state finances. The laws removed many of the tax breaks and deductions that local business could apply to offset against their earnings. With a number of large chemical producers and traders in the state, these laws were in the minds of many introduced to get those companies to pay more tax.
Naturally, those chemical companies weren’t happy about the changes, so they took the new laws to a judge, claiming they weren’t legal. As the Washington Times reported in Dec 2015, “The Louisiana Chemical Association (LCA) argued that the temporary suspension of a 1-cent sales tax exemption on business utilities didn’t receive the required votes for passage in the state House of Representatives and was unconstitutional.”
Unfortunately for the LCA, the judge disagreed, stating, “I think the procedure for adoption for this concurrent resolution was in accordance with the constitution.”
The LCA duly appealed, believing that the State had not reached the required number of votes in both houses of government to change the tax laws.
While the legal fight continues, “Several chemical companies have paid the taxes under protest, so the money can’t be spent while the lawsuit is pending,” according to the Washington Times report of Feb 2016.
Like all matters of tax and the law, the battle looks to be long and expensive, with both sides locking horns for their own self interests.
Previous tax laws have been implemented around the world that target specific industries, such as the UK’s recent introduction of a tax on soft drinks with a high sugar content. But tax laws like these are introduced as a health issue or other public benefit. For example, the tax will not only reduce national sugar consumption but, the money raised from the tax will also be spent on improving public health. As the BBC reports here, “Mr Osborne [the Finance Minister] said the money raised – an estimated £520m a year – will be spent on increasing the funding for sport in primary schools.”
While much of the LCA’s case focuses on the technicality of the law’s implementation, it has left industry heads and academics wondering if it fair or reasonable for a tax law to be changed to target a single business sector. Taxes on alcohol, cigarettes and petrol are all public health issues. But whilst the chemicals industry gets much bad press for ‘poisoning the planet’ or ‘creating toxic waste’, the fact remains that responsible chemical businesses provide the products that are vital for modern life. Without the chemicals industry, our world would step back 100 years. So why target the sector with tax laws?
Meanwhile, the LCA’s lawsuit looks set to continue. To find out the result, just watch this space.