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Jan 10, 2016 News
Given the millions of dollars lost through tax evasion, Finance Minster, Winston Jordan, says that the Guyana Revenue Authority (GRA) will have to tighten up on that front as well as the monitoring of concessions.
Jordan said that according to established protocols, GRA would make the recommendation to the Ministry of Finance for companies and investors to be granted certain concessions for their respective sectors, provided they qualify for it.
He noted that the onus would then rest on GRA to ensure that it monitors how these concessions are used and that the companies or investors comply with the reporting requirements attached to the granting of these tax breaks.
He noted, however, that there have been complaints over the years that many do not adhere to the terms and conditions for which concessions are granted.
The Finance Minister said that concessions are granted with certain conditions such as the creation of a number of jobs within a particular timeframe, for example. He added that tax breaks for vehicles and equipment for example would be granted for them to be used for a particular project.
Jordan said, “If there is a breach of the agreement upon which the concessions are granted then they are supposed to be revoked. Investors, both foreign and local, need to ensure that when they are granted concessions for vehicles for example, that they stick to the agreement and not misuse their concessions. Admittedly, we have heard of a number of instances where this takes place and it means that GRA would have to tighten up on the monitoring of concessions and take the necessary action when it finds defaulters.”
Jordan then referred to a reported incident last year involving Chinese logging company, BaiShanLin Forest Development Inc. This company was using its concessionary vehicles to truck sand to the US$150M expansion project at the Cheddi Jagan International Airport (CJIA), Timehri.
Based on complaints by local truck operators, reporters from Kaieteur News had confirmed that scores of trucks from BaiShanLin were working on the runway expansion of the Cheddi Jagan International Airport.
In a compound managed by the CJIA contractor, China Harbour Engineering Company (CHEC), several of BaiShanLin’s trucks and equipment were seen. There was evidence that crude attempts had been made to cover up the logo of BaiShanLin on a number of trucks. Some of the logos were painted over while others were covered by white plastic.
However, the registrations were still in BaiShanLin’s company name. It is unclear whether CHEC’s contract allowed it to hire BaiShanLin without going to tender. As a matter of fact, the contract signed between the Government of Guyana and CHEC, and dated November 2011, placed the provision of sand as a responsibility of the Government of Guyana.
From the aforementioned indicators, the Finance Minister said that this is a matter which should have been picked up by GRA as it constitutes misuse of concessions.
This particular company is in deep trouble with Government for failing to construct a wood processing facility in Region 10. The establishment has been here almost a decade and was granted hundreds of millions of dollars in tax and duty free concessions. Last year, log exports were halted for BaiShanLin pending an assessment by Government regulators of the company’s operations.
The company says that it is awaiting financing from the China Development Bank for the processing facility and wants a two-year extension.
The duty free concessions were for trucks, skidders, excavators and other equipment to be used specifically for BaiShanLin’s activities in their logging concessions.
Local experts say that it would be a breach of the company’s investment agreement to use it elsewhere, in another sector, or in this case, for hire to another company.
The exact number of trucks and equipment BaiShanLin shipped in has never been disclosed, but insiders believe that the company has at least 200 trucks.
Tax exemptions and concessions granted last year amounted to an astounding $55B (US$275M) but the new Government has vowed to fix the broken system.
During his maiden National Budget last year, Jordan made it clear that the situation at GRA was totally unacceptable as he had found that it was politically compromised under the previous administration.
Jordan, on assuming, had said that he found a tax system that is also characterized by high rates. This he said, resulted in “innumerable requests for tax exemptions and concessions, which totaled $55 billion, in 2014.”
Also unacceptable for Jordan was the level of tax evasion which he said is “clearly unlawful, discriminatory and stifles competition.” Jordan had said that there was widespread discretionary elements, which have been used to favour and reward friends, rather than encourage development and with little or no compliance.
“In short, the system is broken and we must fix it in a comprehensive manner – one that results in a transparent and predictable tax system that rewards effort, promotes investment, improves our national competitiveness, and removes distortions between and across sectors.”
“Further, the authority lacked transparency and accountability, as it was politically compromised under the previous administration. Policies and procedures were poorly enforced, and there was limited intelligence-gathering. Further, the cost of conducting transactions was high, which often led to involuntary compliance.”
He had said that it is imperative that GRA’s organizational and managerial capacity is strengthened and enhanced in a sustainable manner.
“In this regard, we will constantly review the current operational standards and bring them in line with international best practices, train a core staff to manage the authority, and build a new ethos that emphasizes service delivery and efficient revenue collection. The expectation is that when the tax reforms are fully implemented, this capacity strengthening will compensate for the decline in foreign inflows.”
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