Plastic has an advantage

January 9, 2010 | By | Filed Under Editorial 

Guyanese pay one of the highest income tax rates in the world. They are asked to pay thirty-three per cent on their taxable income. This tax is derived after the minimum wage, National Insurance Scheme payments and any other deduction are made from the gross earning.
When the idea was mooted that the income tax be adjusted downward the government argued that the economy simply could not afford to; that the public coffers had to be supported so that there could be national development efforts.
However, the people paying the income tax are for the greater part those in Government employ. Those in the private sector also pay their fair share of taxes but many in the population escape because there are transactions that escape income tax. This is because of the nature of the cash-oriented economy.
Even large business people seem more than willing to engage in cash transactions and where necessary, avoid using the commercial banks because the transactions will be recorded. At the same time the average Guyanese businessman appears to have an aversion to paying taxes.
A smart government could, however, change this trend and habit by introducing measures that would capture almost every financial transaction. This is nothing impossible because there are countries that have successfully applied measures to monitor and capture the financial transactions. The United States and all the major countries have done this. Technology has helped.
One method is the introduction of plastic money. The four large commercial banks in Guyana got together a few years ago with a view to making the use of plastic money more widespread. There was some hesitation because the support mechanisms were not there—mechanisms such as a credit monitoring system. These systems are still not there because the business being approached by a consumer with anything other than cash has no way of authenticating the mode of transaction. Because of this, many business houses have been the target of fraudsters, some of whom appeared to use Manager’s Cheques, all fraudulent. People who attempted to use personal cheques were also more than likely to fleece a business because there is no way to authenticate the account save by telephoning the bank that purports to be responsible for the account.
Eventually, the banks have introduced the debit card which is now being accepted as legal tender. The problem at this time is that the terminals are not for use by any debit card holder. There is no need for rocket science to make any terminal compatible with the various cards issued by different commercial banks.
If this becomes the norm, the government can be assured that there will be so much more to be collected because the various financial transactions will be recorded and the taxes duly paid. There is another benefit to be derived. At present, the government spends millions of dollars each year trying to outfit the law enforcement agencies to combat crime. And the most common crime appears to be armed robberies.
There are these robberies because the perpetrators know that there is cash at the end of the attack. There are no armed robberies committed on people in countries where plastic money predominate. Even the business places would not have much cash lying around in the drawers.
The governments, particularly the United States Government, also seek to limit the volume of cash an individual may have on his person. Any sum above a certain amount is seized until a proper explanation is offered. This is an offshoot of the money laundering legislation. Guyana, after many attempts, is still to enact money laundering legislation.
The call for plastic money cannot be overemphasised. The benefits are going to be tremendous especially at this time when Guyana is forced to borrow to fund its many programmes. A wider tax net would surely aid Guyana in actually operating without foreign aid. Plastic money would expand this tax base.

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