Tax Committee zeros in on high ‘revenue loss’ through exemptions to diplomats, remigrants, others

Mar 10, 2017 News

Within the last two decades, questions have been raised about the benefits derived from the

GRA Boss, Godfrey Statia

grant of millions worth in tax incentives and holidays to certain groups of people.
To gather a greater understanding of Guyana’s tax incentive system in this regard, a Tax Reform Committee (TRC), which was established by the Government examined the revenue loss incurred by the country when these exemptions are granted.
The Committee said that the most important revenue loss pertained to duty exempted goods. It said that this is partly related to the extreme openness of the Guyana economy and the high propensity to import, as seen over the years in the case of companies/businesses.
The Committee said however, the weighting for imports is even greater in the case of diplomats, public officials/officers and re-migrants, probably due to the high rate of exemption on vehicles for these categories of persons.
The body said that the revenue loss for exemptions granted to diplomats for the year 2014 alone was $1.4B. The revenue loss for incentives granted to re-migrants and public officials was $2.1B and $1.4B respectively.
With respect to incentives, the Committee explained that these are typically provided to companies and businessmen, in the expectation that they would lead to greater volumes of

NICIL Chairman, Dr. Maurice Odle

investment and re-investment, than would otherwise be the case.
The Committee noted that the incentives may relate to both foreign and local investors. It said that these can be designed to be more generous, depending on the expected benefits, in terms of level of investment, number of jobs to be created, the vintage nature of the technology to be transferred, the number of employees to be trained, etc.
The Committee said that the latter conditions may be expressly stated in the form of performance requirements for the receipt of the incentives.
In addition, the Committee commented that the types of incentives may comprise exemptions of various sorts, such as customs duties, value added tax (VAT), and excise taxes. It said that customs duties are concentrated in fuel products, industrial inputs and passenger cars; VAT in industrial inputs; and excise tax in fuel products and passenger cars.
The committee also noted that there are investments and accelerated depreciation allowances, along with Export-Processing Zone (EPZ)-type infrastructure facilities, and the incentives mix, which may depend on whether the economic activity is included in the incentives legislative and regulatory framework.
Besides the aforementioned exemptions, the TRC said that the other major incentives tool relates to the granting of tax holidays.
Based on data provided by the Guyana Revenue Authority, the Committee pointed out that companies and businesses accounted for about 78 per cent of the total value of exemptions, in terms of revenue lost to the national treasury in 2014. The Committee said that the types of exemptions responsible for the revenue loss related to customs duties, VAT, excise taxes and

Chartered Accountant, Chris Ram

stamp duty foregone.
The Committee said, “Revenue loss would also pertain to the granting of tax holidays. Because of the failure to comply with the requirement in the Investment Act for an audit of tax holidays granted and the laying of the report thereon in the National Assembly, it is not possible to determine the revenue foregone in the granting of tax holidays in Guyana.”
The Committee continued, “The entities that are involved in the granting of tax holidays are GO-Invest, the Guyana Revenue Authority and the Ministry of Finance. However, it does not appear that there is any mechanism in place for any post-approval audit or review.”
It added, “For the year 2014, the revenue loss from exemptions, alone, relating to companies/businesses was equivalent to $43.2 billion, and for all beneficiary categories, $55.6 billion. In 2015, the revenue loss from exemptions alone, relating to companies/businesses, was $56.6 billion.”
Additionally, the TRC said that the total corporate tax remissions/exemptions were equivalent to 31 percent of Central Government tax revenue and exceeded actual corporate tax revenue in 2014.
The Tax Reform Committee was established in August 2015. It was chaired by economist, Dr. Maurice Odle, and included tax specialists such as Christopher Ram, GRA Boss Godfrey Statia and Dr. Thomas Singh.