The Story within the Story…Everyone must pay their fair share of taxes, but…

Mar 05, 2017 News

By Leonard Gildarie

There is an old saying that two things are a must: death and taxes.

Leonard Gildarie

This past week, especially so, the debate has been on implementation of a 14 percent Value Added Tax (VAT) on private education. Government has announced plans to review it, but it is unlikely that it will be lifted anytime soon.
The feeling has been expressed by many, especially among the working class, that this (education) is one area that should be a no-no. In our newsroom, the matter was heavily debated. There was deep division. There are several angles to this issue that must be examined.
Ultimately, it is the consumers that feel the brunt of any taxes, whichever way it is twisted or spun.
I have in the past expressed alarm at the tax leakages in this country. We have allowed a situation where a vast majority of our citizens not only do not appear on the taxman’s radar, but those that did pay, under-reported their earnings. Many of them that did pay have been aided by crooked accountants that have done their profession and this country a disservice. Imagine a mere office staffer paying more taxes annually than the tire shop across the road where the owner drives a Toyota Prado and has three other cars. An examination of his tax file will tell a worrying tale of a system that badly needs fixing.
The Guyana Revenue Authority (GRA) itself has been complaining about the tax collection situation. Less than 60 percent of what is due is being collected. Then there is of course the under-reporting. We have many shops right in our neighbourhood. How much tax do you think is being paid? Some, I am told, barely pay $30,000 annually (US$150). That is right, you have heard it. They make millions annually.
We have many businesses in Guyana where people are being paid and no taxes are remitted. How many persons do you know working on a dredge in the bush, who collect gold instead of cash, come out to their home and pay no taxes?
In Berbice and Region One, smuggling has become a way of life. We are losing heavily here too.
I have blamed GRA in the past for the state of this country’s infrastructure. Because of the absence of staffers, GRA was unable to properly conduct raids and do proper monitoring. There were also a few protected businesses.

BARELY HANGING IN
I understand that the entity has now taken aggressive steps to correct the situation and has announced zero-tolerance for corruption with its staffers.
Yes, we were plodding along merrily with everybody doing their little side business. Many are receiving two incomes, but only one is reported. Yes, we seemed happy, but it would have come crashing down eventually. We were not attracting heavy investments fast enough to counter our increase in spending.
For me, personally, we have to fix this problem of tax collection. Those monies are crucial to the running of this country. We can no longer run on auto-pilot. We have to collect the monies from somewhere. The enforcement will be highly unpopular, as no one likes paying taxes. We intend to lift this country to another level. Oil is coming, but we have to ensure our systems are robust to deal with the bonus earnings.
So we come to the implementation of that 14 percent VAT on private education.
I live in Diamond. In neighbouring Grove, there are three private schools that I know of, including one belonging to or with close linkages to a current Parliamentarian.
Many parents, distrustful of the current public schools, opt to the private ones. I know because quite a few of my friends are sending their children there. They are not rich people.
What we did not know is that Government has not been paying much attention to these schools that have been blossoming up.
There is little inspection to verify the standards of education, and until now we were unaware of the monies that were being raked in, but with little taxes seen. Then there are private schools that are non-profit organizations. Fine, but the law still requires returns being filed. Then there are others that registered as businesses.

BELOW RADAR
Here is what the Ministry of Finance and GRA has been telling us.
According to Finance Minister Winston Jordan, only 54 private schools were registered with GRA. There are more that are registered nowhere. In fact, only half of the private schools are registered.
Of those 54 schools, Jordan said that only 20 percent or 11 are recognized by the Ministry of Education. Ten percent of those private schools are registered as non-profit organizations, while 14 percent are registered as profit-making entities.
Providing further statistics, the Finance Minister said that 26 percent of these institutions are registered for, and are already applying the VAT for some of their services and sale of zero-rated items.
Jordan said that both categories provide educational services at competitive rates and the tuition fees range between $144,000 and $300,000 – depending on the grade level of the student.
Jordan added that in many cases, it has been determined that the fees payable to the schools exceed those that are even charged by the University of Guyana.
Significantly, Jordan said that the total tuition fees charged by the top eight of these private institutions exceed $2B annually. “So 14 percent of that top eight gives us roughly $280 million to $300 million in VAT,” Jordan explained.
The Finance Minister said that these fees do not include fees charged for other services offered by these institutions such as extra lessons, coaching fees, uniforms, books, lunch and after care.
Both Jordan and the GRA pointed out that the private schools, which are paying little in taxes, should follow GTT and the Timehri airport, which instead of passing VAT charges to consumers, have opted to absorb this cost.
What has me angry is that these schools reportedly have hired teachers as contract workers and therefore pay no income tax or take out NIS for them.
I will say this…no business entity can continue to operate at a loss for very long. So profits are being made.
Secondly, there is the school of thought that if private schools were not paying their fair share of taxes, steps have to be taken to collect.
I have heard arguments that GRA should have moved to collect from these schools before even thinking about implementing the VAT. Maybe so.
The fact is many countries are charging taxes on every service.
I was in New York back in July. In almost all the stores, the bill comes with an 8 percent tax. Guess what? All the consumers are required to pay.
VAT has been raking in billions. The administration says that it will look to reduce the VAT rate come next year if targets are exceeded.
For me, we have to as a people and Government be responsible.
As a people, we have to start accepting that GRA will come after you. A country is as strong as it laws.
Secondly, the country has been asked to abide with a host of new measures, including restrictions on older vehicles and used tyres from this month-end.
We have to be careful that by introducing these taxes and restrictions too quickly, we are not stifling the little available income of the working man.
It looks good at the GRA end, but state spending is not the only thing that drives the economy of this country…consumer spending also plays a role. We are receiving reports of reduced consumer spending…a worry sign indeed.
We must look at the bigger picture.