By Kiana Wilburg
Taxes must be perceived as a social contract between the taxpayer, the government, the Revenue Authority and the Appellate processes.
The Authority has a responsibility to ensure that citizens understand that the payment of taxes is an investment into the country’s progress.
In addition to this, the mission of the revenue authority is to promote compliance with Guyana’s tax, trade and border laws and regulations through education, quality of service and responsible enforcement, thereby contributing to the economic and social well-being of the people of Guyana.
Its goal is to provide the best possible service at an affordable cost, be fair and respectful to the taxpaying public, manage its resources effectively and economically, and be responsive and committed to the improvement of its service.
But when it comes to taxes, the Government also has to shoulder some responsibilities. In fact, it is the government’s duty to design and implement an equitable taxation regime following the tenets of taxation. These include:
(1) Adequacy: taxes should be just-enough to generate revenue required for provision of essential public services.
(2) Broad Based: taxes should be spread over as wide as possible section of the population, or sectors of economy, to minimize the individual tax burden.
(3) Compatibility: taxes should be coordinated to ensure tax neutrality and overall objectives of good governance.
(4) Convenience: taxes should be enforced in a manner that facilitates voluntary compliance to the maximum extent possible.
(5) Earmarking: tax revenue from a specific source should be dedicated to a specific purpose only when there is a direct cost-and-benefit link between the tax source and the expenditure, such as use of motor fuel tax for road maintenance.
(6) Efficiency: tax collection efforts should not cost an inordinately high percentage of tax revenues.
(7) Equity: taxes should equally burden all individuals or entities in similar economic circumstances.
(8) Neutrality: taxes should not favour any one group or sector over another, and should not be designed to interfere-with or influence individual decisions-making.
(9) Predictability: collection of taxes should reinforce their inevitability and regularity.
(10) Restricted exemptions: tax exemptions must only be for specific purposes (such as to encourage investment) and for a limited period.
(11) Simplicity: tax assessment and determination should be easy to understand by the average taxpayer.
Guyana’s tax system allows for self-assessment and voluntary compliance. It is estimated that 98% of all taxes collected by the Authority is through voluntary compliance.
At first glance, the system seems to be working, with taxpayers holding to their part of the social contract. Upon further examination, however, this certainly is not the case. 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.
These taxpayers who conduct trade and commerce, agriculture and fishing, and professions and vocations, usually operate with cash, and are reluctant to maintain records, making them the most hard to tax group in the country.
Even though a taxpayer’s 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 form of public service, facilities and infrastructure built by government such as highways, schools, bridges, hospitals, health centres, subsidized food, clothing and shelter, and make little or no contributions to the tax pool.
As stated earlier, among the roles of the Authority is to ensure that each taxpayer pays his rightful tax, the tax laws are administered fairly and consistently, and at the same time strive for efficiency in tax collection.
Without a proper functioning IT system, this could never be achieved.
An examination of the Total Revenue Integrated Processing System (TRIPS) revealed that despite the outlay of millions of US dollars from 2013 to 2016, to bring the archaic TRIPS 1 System up-to-date by the introduction of an overlay of TRIPS2, not one single module was delivered.
Furthermore, many of the modules paid for in TRIPS 1 in 2007 were never even delivered.
Discussions were held with the Crown Agents and the following was decided:
1. Cease all work on the Customs modules
2. Concentrate all activity on the completion of the Internal Revenue Modules, inclusive of e-filing services with clear delivery dates
3. Hold further payments until the delivery of these modules.
Simultaneously, GRA began discussions with the United Nations Conference on Trade and Development (UNCTAD), regarding the introduction of the ASYCUDA single window system.
The UNCTAD Automated System for Customs Data (ASYCUDA) is an integrated customs management system for international trade and transport operations in a modern automated environment which allows for customs administrations and the trade community to comply with international standards when fulfilling import, export and transit-related procedures.
Through its ASYCUDA Programme, GRA hopes to:
• Modernize customs operations and improve revenue collection
• Facilitate trade efficiency and competitiveness by substantially reducing transaction time and costs
• Improve security by streamlining procedures of cargo control, transit of goods and clearance of goods
• Reduce corruption by enhancing the transparency of transactions
• Promote sustainable development by cutting down on the use of paper, through the use of electronic transactions and documents.
The GRA Commissioner-General, Godfrey Statia, was happy to report recently that an agreement has been signed with UNCTAD, payment effected, a team chosen, and a pilot project set to commence shortly at the John Fernandes wharf.
Further testing has also begun for the remaining TRIPS modules, and the Commissioner-General is assured by his IT staff that they seem promising, and GRA would be in a position to offer some eservices including e-filing in time for the 2018 filing season.
Discussions re-commenced with the Canadian Bank Note company, aimed at introducing the Stamp System, thereby minimizing revenue leakages through the smuggling of alcohol and tobacco. Statia said that this programme will be introduced by the end of October 2017 with a reduction of project costs of nearly US$1M and the programme extended to 2024 instead of 2022.
Recognizing the need to improve efficiency and reducing downtime, the Authority re-introduced the Post Clearance Audit, allowed containers of reputable importers to be done on site, and introduced the Trusted Trader programme, whereby by meeting certain criteria, containers are expeditiously cleared, thereby reducing demurrage fees and downtime.
After deliberations with wharf owners, and looking at alternative sites, a Memorandum of Understanding (MOU) was signed with the Guyana National Industrial Company (GNIC) for the location of both a fixed and a movable scanner on its premises.
This site is expected to be completed by December 2017, and will house the movable scanner presently in GRA’s possession, while the fixed scanner will arrive in Guyana in early 2018 through a grant from the People’s Republic of China.
As a prelude to ASYCUDA, requests are now being made for advance electronic manifests, thereby allowing profiling prior to ports and allowing for easier and faster clearing of containers.
It is a known fact that 20% of taxpayers contribute 80% of revenue collected. In an effort to prioritize revenue collection, a conscious decision was made to establish the Large Taxpayers Unit.
After the completion of the appropriate training program by CARTAC, this Unit will be a reality in November 2017, thereby allowing this elite group of taxpayers a one-stop shop for their taxation needs while at the same time maximizing revenue collection through improved audit, review and compliance methods.
In the area of oil and gas, based on a study conducted by the OTA, the organizational chart has been completed; staff requirements and job specifications identified and budgeted for, with training set to commence by December 31 of this year.
Recognizing the need for an initial five-year strategic plan which will guide its future, funds were procured through the IDB earlier this year, and expressions of interest were drafted to facilitate this process. The consulting firm for the project should be chosen by December 31, 2017 thereby allowing for its early completion in 2018.
In the area of infrastructure, despite limited resources, construction and repairs have commenced at GRA buildings countrywide thereby allowing for improving working conditions for its staff and the general public. Taxpayers now enjoy an air-conditioned atmosphere at the Camp St Head office, and efforts are underway for similar treatment countrywide.
The authority agrees that there is room for improvement in tax education, more interaction with the taxpaying public, and an improvement in systems to minimize paper submissions, reduction in taxpayer lines and duplicity of effort. Rest assured that these matters are being addressed, and you can expect some improvement in the near future.
GRA AND BUSINESS SECTOR
As stated earlier, the private sector is integral to the social contract that must be honoured by the Guyana Revenue Authority.
Additionally, it is crucial that a feedback loop exists between the GRA and business leaders so that both sides can be clear on what proposals are being actively considered, and any potential tax implications and opportunities that may result.
It is only by establishing proactive communication in this manner that a business can achieve a holistic view of the true cost of investment and business opportunities. It is for this reason that the GRA welcomes and supports the Public-Private Partnership initiative.
According to Statia, the onus is on the private sector to give adequate support and advice to its members; to make representations on their behalf at every forum, and to the various ministries. Such representations should be accompanied by facts and proper analyses, not surmisations. This will go a long way in minimizing conflict and improving efficiency.
It is not just changes within the business that tax authorities are required to factor in; there are a multitude of external influences that are affecting the tax landscape. The Organization for Economic Cooperation and Development’s Base Erosion and Profit Shifting (BEPS) project, for instance, aims to address cases where multinational companies shifting profits to lower tax jurisdictions, and thereby contributed to erosion of the tax base.
This new tax framework, which will likely be adopted in one form or another by over 100 countries, is expected to impact many businesses engaged in cross-border trade and operating in multiple jurisdictions.
Tax is a key factor that could affect the profitability and efficiency of the new smart factories, supply chains, and product offerings being considered.
Despite the inherent complexities of the global tax system, through careful, early tax planning and effective communication between all stakeholders, maximum use can be made of the opportunities that exist.
The GRA need not and would not be a barrier to these opportunities. GRA says it is committed to this partnership, and assures the private sector that it will play its part to ensure success for both.
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