Illegal bypass costs Government millions in lost revenue

Illegal bypass costs Government millions in lost revenue – GT&T

May 17, 2009 News

Illegal traffic (bypass) of the Guyana Telephone and Telegraph (GT&T) network is said to be causing the government to lose millions in taxes yearly.

According to GT&T’s 2008 annual report, it is estimated that bypass traffic is costing the government a minimum of US$2million in direct taxes per annum.

And, the report added, that number could expand many times over if the recent trends are sustained. The report also stated that in addition to this direct cost, there is the consequential effect of untraceable traffic terminating to unsuspecting consumers’ phones.

According to the annual report, during last year, GT&T continued to be troubled by the incidence of bypass of its network and has taken the pains of explaining the severe consequences of such illegal activities to the country.

It stated that bypass is seen on two fronts namely persons who bypass the local switches in origination of calls outside of the country and terminating that traffic to unsuspecting persons in the country and secondly, persons who bypass local switches in originating and terminating local traffic.

In both instances, the report adds, the illegal activity not only disregards the laws of the country, but it puts a severe cost to the overall national revenue generation and collection. These illegal operators neither pay corporation tax nor do they collect and pay VAT to the GRA.

“There is no national record of their activities and the volumes they are hiding from the authorities. In addition, the activities of these providers typically and quickly result in an overall reduction in inbound termination rates.”

According to the report, this benefits only the giant overseas carriers in the US and Canada and the like, who have not been lowering rates in the communities of the Guyanese diasporas, but rather expanding very large profits on these calls.

“Guyana is not a large enough destination for the foreign-based carriers to compete vigorously with retail pricing. The history in this industry is that once these rates reduce, they rarely rebound and the indirect subsidy for these inbound calls is irrevocably harmed.”

It noted that local subscribers frequently complain about receiving overseas calls but seeing a local number on their phones (that is, the caller ID reveals a local number while it is an overseas call).

“This could provide a serious threat for national and personal security as the national carrier cannot account for such calls.”

Such illegal activity, if unchecked, would continue to cost millions of dollars in revenue, create irreparable harm to the country’s image as it cannot meet international checks and balances for international calls, and creates a negative international image of our country since most calls are of use costly satellite links with many more calls allocated per circuit

than industry practice, resulting in severe quality issues, and those issues are exacerbated by the fly-by-night nature of these providers and their wholesale partners, with frequent re-routings and shutdowns.

“The Office of the President indicated late last year that it understood that unlicensed and unregulated operations accounted for a significant portion of all such calls and contributed to the creation of a negative image of the state of telecommunication in the country and also deprived the government of revenue by way of taxes.

The Office of the President signaled that it intended to take action, with the Guyana Revenue Authority taking the lead in regularising the industry.”