– GRA Boss
By Kiana Wilburg
Operators in the trade and commercial sector as well as in the agricultural industry have now topped the list of tax cheats in Guyana.
This is according to Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia.
Expounding further on the matter, Statia asserted that one should first understand that Guyana’s tax system allows for self-assessment and voluntary compliance.
On that premise, the Commissioner General noted that it is estimated that 98 per cent of all taxes collected by the Authority is through voluntary compliance. At first glance, Statia said that the system seems to be working with taxpayers holding to their part of the social contract.
However, upon further examination, the tax chief said that this is certainly not the case.
The tax chief articulated that the contribution of taxes from the self-employed to the tax revenues does not seem to represent what can be considered a fair contribution to total taxes collected.
He noted that in addition to professionals, it has been found that taxpayers who operate in the areas of trade and commerce, agriculture, fishing, and vocations usually work with cash and are reluctant to maintain records. He said that this situation makes these operators the most ‘hard to tax’ groups in the country.
The Commissioner General said that even though taxpayers’ resistance to the payment of taxes in many instances may be motivated by the principle that every economic sacrifice must give an economic benefit in return, these persons reap the benefits in various forms.
He said that these individuals who contribute nothing to the tax pool are able to benefit from public service; facilities and infrastructure built by government such as highways, schools, bridges, hospitals, health centres, subsidized food, clothing and shelter.
Statia also noted that despite the prevalence of the self-employed in trade and commerce, it has been found that many of those operators actually benefit from the VAT system by collecting but not remitting the VAT, either because they themselves are not registered and ought not to be charging VAT, or are engaging in tax theft.
As it relates to the category of professionals, Statia commented, “The professionals are also bleeding us.” He noted that one might ask why this issue has been so hard for the Authority to get under control.
The Commissioner General stated, “It is difficult because we have to get involved in presumptive taxation. Years ago, the professionals, especially the lawyers, they used the court system to block the institution of certain laws.”
Statia added, “And before the judges throw it out as vexatious and frivolous, they give them an ex parte injunction which is foolish because the government and the Revenue Authority are not going anywhere. You can’t stop that.”
In spite of such hurdles, the Commissioner General noted that the Authority will continue to look for ways and means in which to bring the aforementioned tax cheats in line.
APPALING LEVELS OF EVASION
Like almost every country around the world the self-employed as a group has caused tax authorities perpetual nightmares.
In fact, statistics provided to the Tax Reform Commission (TRC) tell a depressing tale of tax evasion among self employed professionals, particularly, doctors, accountants and lawyers, the overwhelming majority of whom, declare gross income well below $10 million per year.
The Commission during its review of the tax system last year, noted while in Guyana the situation has improved somewhat with the self-employed contribution to tax revenues increasing from 0.56% of tax revenues in 1992 climbing to 2.56% in 2014 given the prevalence of the self-employed in the economy that percentage has to be considered negligible.
The Committee that one measure of relevance is a comparison of the taxes paid by the self-employed compared with the taxes paid by employed persons. The Committee, in this regard, exposed that self-employed persons paid $3.5 Billion in income tax in 2014 while employed persons paid $18 Billion, in other words, more than five times as much.
This was the sorry case in 2014 but the gap between the two groups in preceding years was worse.
In order to address this problem, the Commission noted that the Government had introduced legislation in 2003 for the use of presumptive taxation to address the self-employed.
The members of the Committee noted that a World Bank Paper notes that presumptive income taxation is employed primarily in economies where ‘hard-to-tax’ taxpayers comprise the majority of the population and administrative resources are scarce.
It said that many of the persons affected are either unable or unwilling to maintain the books and records required by the tax authorities, including for example the Income Tax (Accounts and Records) Regulations, published under the Income Tax Act.
The World Bank considers presumptive taxation to be “an optimal method of curbing widespread non-compliance without employing excessive government resources because it addresses the concerns of both taxpayer and tax authority. “Presumptive taxation provides taxpayers with a simplified option for tax compliance without requiring full financial transparency.”
Of course, simply having the legislation is not enough, as is evidenced by the 12 years of inaction on the introduction of such a method of taxation.
The Commission also said, “Just by way of example, a presumptive tax on minibuses or sand trucks, water taxis, or professionals may be based on a typical operator in the group or as in the case of the professional at the salary paid by the state.”
The tax commission said it is not unknown, however, for taxpayers to challenge the level of presumptive tax so some caution needs to be exercised and the introduction of the presumptive tax well-thought out.
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