By Kiana Wilburg
Over the years, the system governing tax exemptions at the Guyana Revenue Authority (GRA) was compromised and was not strictly monitored.
Under new management, it appears that the revenue authority is changing the haphazard manner in which it granted exemptions.
This is according to the entity’s Commissioner-General, Godfrey Statia.
In an interview with Kaieteur News, he said that from 2015 to now, exemptions have been reduced tremendously “simply because we have recognized that it was being abused”.
Statia said that at one point, Guyana granted close to $80B in concessions in one fiscal year. The tax boss said that by 2016, this was reduced to $34B in 2016 and this year, it is not even close to $20B.
Statia said, too, that most people love to talk about the need to encourage investors with exemptions. The tax chief said, however, that no one thinks about the cost to the state and taxpayers when exorbitant exemptions are granted.
He said, “There are just too many exemptions being granted to certain businesses and we need to have a level playing field. If you reduce the exemptions, we would be able to reduce the rate of taxation. Thereafter, you wouldn’t have to expend so much energy trying to police some of these exemptions. Those energies can go towards finding revenue from other sources”.
The GRA Commissioner-General insisted that the authority was expending too much time giving out exemptions as opposed to ensuring that the reason/arrangements for which they are given are adhered to.
Statia said that he is determined to improve this state of affairs.
The issue of the abuse of tax exemptions was extensively documented in the report of the Tax Reform Commission.
The report notes that tax reform usually starts out with the intention to make a nation more progressive. In Guyana’s case, however, it appears that leaders have done quite the opposite.
The document highlights that some six years ago, tax measures were implemented by the former regime which opened the floodgates for increased exemptions and remissions.
In fact, tax advisors asserted that the move was one that made tax administration difficult and revenue loss significant. Guyana as a result stood to be one of the leading countries with massive overlay of tax exemptions and remissions. The tax advisors called for a major reduction in the incidence of tax holidays which is now being answered by the Guyana Revenue Authority.
Speaking to the genesis of the former regime’s actions, the Tax Reform Commission which was established by the Granger administration said that between 2009 and 2013, two comprehensive studies on Guyana’s tax system and its administration were conducted.
They opined that fundamental reform measures were proposed in both of these studies, but the recommendations were not implemented.
Instead, in 2011, the PPP Government undertook major tax policy reversals when the Fiscal Management and Accountability Act of 2003 was amended to introduce more exemptions and remissions into the tax system.
The Commission members said that countries have generally been slow to roll back tax incentives, partly because it has been very difficult to determine whether the incentives are having the desired effect or not, in the absence of data that would facilitate serious research and investigation.
The advisors said that a consensus has been slowly emerging that, outside of, for example, light manufacturing activities and internet-based call centre backroom services, tax incentives are not very effective in attracting foreign investment and merely result in a “race to the bottom”.
The Commission also highlighted the strong views held by the International Monetary Fund, World Bank, the Organization for Economic Co-operation and Development and other international institutions, that countries such as Guyana, should focus more on the classical determinants of investment that are possibly within their control, along with other factors that facilitate ‘doing business’ and rely less on tax incentives.
Besides size and factor resource endowment, the international organizations believe that determinants of investment should include consistent and stable macro-economic and fiscal policy; political stability; adequate physical, financial, legal and institutional infrastructure; effective, transparent and accountable public administration; skilled labour force and flexible labour code governing employer and employee relations; availability of adequate dispute resolution mechanisms; and foreign exchange rules and the ability to repatriate profits.
The Tax Reform Commission included the likes of Chartered Accountant, Christopher Ram; Commissioner General of the Guyana Revenue Authority Godfrey Statia; NICIL’s Chairman, Dr. Maurice Odle and Economist, Dr. Thomas Singh.
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