Make things simple!

Sep 23, 2016 Features / Columnists, Peeping Tom

The government is well-intentioned in demanding that persons enjoying concessions under agreements with the government should be in good standing with the tax authorities. However, the experience in the past would suggest that it may be best to separate the function of granting tax concessions from ensuing that recipients pay their fair share of taxes.
There was a time in Guyana when persons wanting to leave the country had to apply to the tax authorities for a certificate which would indicate that they were in good standing with the tax authorities or had made arrangements to settle their indebtedness to the tax authorities.
It is not hard to imagine the sort of corruption that such a requirement led to. Also, it constituted a breach of the right to freedom of movement but no one ever challenged.
There is still in existence a system in which persons who are tendering for government contracts are required to obtain compliance certificates from the tax authorities and the NIS before they can qualify for the award of a government contract. This requirement constitutes a hindrance on person competing for Government contracts.
The government should keep things simple. It should try to impose conditions which can have the effect of disqualifying persons from tendering for Government contracts. It should also separate tax considerations from administrative requirements. The tax man must do his work and the evaluators must evaluate based on the criteria before them.
The purpose in the past of having persons obtain compliance before travelling or tendering for contracts was not about the integrity of contractors or travellers. It was a means to support the tax authorities. A great many persons migrated without being in good standing. The government was desperate for increased taxes and therefore implemented measures that they presumed would help the tax authorities collect more taxes. It was ineffective.
The PNC government did eventually abolish the requirement of the need for a travel exit certificate as part of measures to liberalize the economy. The thinking behind that liberalization was in keeping with best practices around the world in which tax functions are separated from other aspects of government work.
In other words, it was intended to ease the use of the tax weapon against citizens and to ensure that government stranglehold on government is eased.
The tax system has also changed. There is a system called VAT which effectively encouraged compliance. The tax authorities do not need administrative red tape to help them collect taxes.
There is no reason for government to be now demanding that persons be in good standing with the Guyana Revenue Authority before they can be granted concession. This is yet another layer of bureaucratic red tape that is being added. It also means that we are going backwards rather than forwards because instead of liberalizing the system we are imposing further administrative bottlenecks on investors.
You do not improve the collection of tax agencies by tying concessions to persons paying their taxes. You do not promote investments by doing this. You do not ensure fair competition by adding red tape.
The new measure benefits new companies which may not yet be due to pay taxes. If there is a legal dispute between a company and the GRA – and there are always such disputes – the GRA may refuse to grant that company a ‘good standing’ certificate on the grounds of its position on the tax dispute. This effectively disqualifies a bidder who may well be in the right.
The system of government has to be simplified. Investors need a predictable and simplified system.
You will not encourage investment unless there is predictability and simplicity.
Investors should not have to be seeking incentive agreements with the government through GOINVEST.
Such agreements should only be for massive and major investments in which there is a need for special concessions. The government should have a predictable system of tax concessions that should be fair and applied equally to all those qualifying.
Make the system less dependent on political or administrative approval. Separate tax collection measures from incentives offered to businesses.

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