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Build a GRA that will make Guyanese proud
Dear Editor,
It was very encouraging to hear the New Minister of Finance’s pronouncements on the GRA and the way forward. The GRA is sorely in need of a new direction to fulfill its important role and live up to its mission statement.
The previous CG was more interested in pleasing his political bosses rather than fulfilling his responsibilities under the Revenue Authority Act. Also, it’s good to see the new Minister taking a leading role, as it his responsibility to ensure that the GRA fulfills its mandate.
Some years ago, USAID had funded a programme which was carried out by The Millennium Corporation. One of the objectives was the strengthening of the tax policies capacity of the Ministry of Finance. What has been the outcome? Drafting of legislation, including tax laws and regulations should emanate from the Ministry of Finance and not the GRA. This should avoid some of the problems experienced with the VAT implementation.
There is a Committee presently studying tax reform. It will be interesting to see its recommendation. Regardless of any tax reform, my experience with the Guyana tax system has taught me that there is a very high level of non-compliance. So what action will be taken to reduce this non-compliance?
The Minister should be complimented for increasing the items that are zero- rated. However, the VAT rate could be reduced, if there is an increase in corporation taxes collected. There could be a lower corporation tax rate also through tax credits or allowances to encourage certain type of businesses.
There has been an increase in foreign investments over the years, especially in the resource sector. There are many opportunities to avoid taxes through transfer pricing arrangement in goods and services. We have to have the expertise to be able to audit the activities of these multinationals and to use our bilateral tax treaties to protect the erosion of our tax base. Very significant amounts of tax revenues have been lost in the fishing, telecommunications, mining and logging sectors because the GRA either lacked the will or the skills to investigate these businesses.
The Minister should also look at the issue of having taxpayers file audited financial statements for tax purposes. This creates an additional cost of doing business (especially small businesses) and from my experience has not prevented tax avoidance and evasion. In fact, in advanced countries this is not a requirement and even where audited statements are filed, the taxpayers are still subject to audits.
The Minister opening move is admirable. However, the success of the GRA will depend on professional leadership and a strong audit function. By taking this approach, the VAT rate can be reduced to lower the burden on the working class and to encourage consumption which will increase demand and hence production. The threat of an audit increases compliance significantly. This will allow for the lowering of corporation tax rates and/or the granting of credits which will encourage investments and hence create more employment.
The GRA has received a lot of assistance over the past 20 years to increase its efficiency and effectiveness in fulfilling its mandate. The Minister should now focus his energy on building a GRA that will make Guyanese proud.
Dhanraj Deonarine
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