…Tax Chief says 1 in every 3 is a trickster
By Kiana Wilburg
“The situation involving re-migrants has gone from bad to worse. At first it was one in five, but now, it is one in every three re-migrants being caught trying to cheat the system.”
Those sentiments of frustration were expressed by Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia during a recent interview with Kaieteur News.
He explained that an aggressive campaign against cunning re-migrants has led to a significant decline in the concessions granted to this group this year.
According to the latest mid-year report, re-migrants got concessions worth $481M for 2017 but for 2018, the figure totalled $391M.
Statia said, “We have been seizing a set of vehicles, and if you look at the statistics, you will see how the concessions have been reducing. We are making them pay for trying to trick us. It used to be one in five. It was bad, but it is getting worse. You have to show me the source of funding you used to buy the vehicle before you get the concession. And people have taken me to court over this. I am fighting an uphill battle…”
The Commissioner General added, “Why do I have to run behind these people to do the right thing? When you’re giving away these concessions it’s all sorts of things you have to put in place to ensure that they are not abused. Even when you look at these companies as well, all these exemptions they get, I have to check on a quarterly basis to ensure they are using it for the purpose they were granted. And that is why I keep insisting that you should use tax credits instead of concessions.”
Statia said that he is a proponent for tax credits being applied in Guyana. He holds the view that there is a strong case for it here.
“They are simple and easier to administer. They allow you to comply before you get the tax credits. If you move away from exemptions and give tax credits, life would be easier, so long as it is administrated in the right way. But to move in that direction, you need your IT system in place and your people need to be schooled in it. But that is easy.”
Statia said however that while a strong IT system needs to be in place, tax credits can be implemented almost immediately for corporate taxation (which involves imposing a tax on the net income of a company).
The GRA Commissioner General said that tax credits for example, can be applied to the gold sector. Statia said that he has already discussed this matter with gold miners and “I think they are coming around to it as being the most ideal thing for them.”
The Chartered Accountant stressed that the system regarding re-migrants and even the granting of concessions needs to be revamped.
CASE FOR TAX CREDITS
Guyana loses billions of dollars on an annual basis through the granting of tax exemptions. Hoping to cut these losses significantly, the GRA has its sights set on implementing a number of measures.
Already, the revenue-earning authority has reduced, to a great extent, the number of exemptions it has granted for 2017. Be that as it may, it is weighing the pros and cons of implementing a system of tax credits as opposed to the usual exemptions which are approved.
The case for tax credits was initially proposed for Guyana by some of the nation’s best tax advisors who were contracted to be part of the Tax Reform Commission in 2015. That Commission comprised GRA Commissioner General, Godfrey Statia, Chartered Accountant, Christopher Ram and Economist Dr. Maurice Odle, among others.
In the report which was prepared by the Commission, Tax credits are noted to be a type of incentive, which allows certain taxpayers to subtract the amount of the credit from the total taxes owed, and when appropriately used, it encourages investment and compliance.
Unlike upfront incentives, which are hard to police, tax credits are only given upon submission of the proof of the actual activity, hence it forces the taxpayer to comply in order to so benefit.
The Commission said, “For instance, instead of granting exemptions upfront to gold miners, an efficient tax credit regime will allow for such a credit to be granted when gold is sold to the Board.”
The Commissioners believe that this will not only encourage compliance, but will reduce smuggling and sale of the exempted fuel, thereby minimizing the probability that these persons are unjustly enriched at the benefit of the state.
The Commission stressed that the current methods for granting and verifying tax exemptions consequently needs to be reformed and strengthened urgently in order to stop/control the drainage on the State’s revenues.
“It may be more prudent to require the payment of all applicable taxes upfront and for applications to be submitted for refunds, subsequently, when valid evidence is available and proper audits can be performed, or to replace the granting of tax exemptions with the granting of tax credits which can be claimed when tax returns are submitted, or a hybrid of both systems.”
The body recommended that consideration be given to phasing out, where possible, all duty and tax-free allowances in favour of a system of tax credits, a principle inherent in the system of capital allowances.
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