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Apr 20, 2017 News
– Complete overhaul needed to alter certain practices – Tax advisors
Guyana has suffered significant revenue loss due to widespread instances of abuse and the ad hoc policies which governed waivers in the energy sector.
As such, tax advisors are now calling for a complete overhaul of the system.
This conclusion was made by the Members of the Tax Reform Commission which was established by the Granger administration. The Committee consisted of Chartered Accountant, Christopher Ram, Commissioner-General of the Guyana Revenue Authority (GRA), Godfrey Statia, Chairman of NICIL, Dr. Maurice Odle and Economist, Dr. Thomas Singh.
Speaking to some of the anomalies in the energy sector, the Commission started out by first explaining that nominally, petroleum products attract significant duties of 20% and excise taxes of 50%. However, the 20% is waived under the Fiscal Management and Accountability Act to cushion the impact of the world market price.
The Members of the Commission said that the 50% is being collected on both gasoline and diesel from all importing distributors but used as a variable adjustment to maintain price stability.
It explained that an exception is in respect of large scale miners who pay Excise Tax of only 10% by way of investment agreements, while the fishing industry has a special arrangement under an administrative policy and pay no excise tax or Customs Duty.
More recently, the Commission noted that the Government signed an agreement with the medium and small scale miners for the 10% arrangement to apply to them, subject to their being tax compliant.
The Committee said that no miner has been able to benefit from this arrangement because of the widespread non-compliance by this group.
Furthermore, the Commission pointed out that for the year 2015 for which taxes were remitted for companies and businesses, it amounted to $56.7 billion. It noted that the major sectors benefiting from exemptions include; Mining, Manufacturing and Telecommunications. The Commission said the subsidies to these sectors have a distortionary effect on the economy.
Accordingly, the Tax Reform Committee recommends that conditional subsidies should be significantly reduced if not eliminated over a five-year period.
Where these have been granted under binding agreements, it said that those agreements must continue to be honoured but not renewed.
The losses from the granting of Investment Development Agreements (IDA) for the years 2013 to 2015 are a cause for some concern.
The Commission pointed out that many sectors receive in concessions far more than they contribute in taxes.
The Tax advisors said that while this fact itself does not necessarily justify the abolition or the withdrawal of the concessions, it is clear that an urgent review is required.
Given the aforementioned, the Committee recommended that the Government takes a number of actions.
The tax advisors of the Commission called for the introduction of a post-audit system for concessions granted, including the posting of a bond/guarantee to ensure that commitments are met.
They also called for a requirement to be put in place to ensure periodic audit and publication of reports of tax holidays granted as well as investment agreements entered into.
Furthermore, the Commission said that not only the Government, but the country needs to rethink its energy policy, including whether it will remain dependent on fossil fuel, the policy’s compliance with international environmental obligations, and the incentives it is prepared to offer to alter practices.
The Commission said that it would therefore recommend that the Government begins, if it has not already commenced, a complete review of the country’s energy policies and practices.
The Members of the Commission said that this will help in the formulation of national policies and strategies that in turn, inform fiscal strategies.
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