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GRA zeros in on blatant abuses of tax incentive regime by companies
GRA Commissioner, Godfrey Statia
In an effort to strengthen the tax system, the Guyana Revenue Authority (GRA) is taking a number of steps to close loopholes which allowed for the abuse of the system by several companies. This is according to GRA Commissioner General, Godfrey Statia.
One of the areas that the GRA has already addressed is the manipulation of financial records by companies to avoid paying the fair share of their taxes.
That aside, the Revenue Authority is also making efforts to close other gaps which exist in the tax incentive regime.
These loopholes include existing firms transforming to new entities to qualify for incentives; domestic firms restructuring as foreign investors; transfer pricing schemes with related entities (sales, services, loans, royalties, management contracts); fictitious investments; schemes to accelerate income (or defer deductions) at the end of a tax-holiday period and the over-valuation of assets for depreciation, tax credit, or other purposes.
Other practices which have been identified include companies having fictitious employees and phony training programmes; diverting activities to outside the region or zone; and companies engaging in disguising or the burying of non-qualifying activities into qualifying activities
The abuse of the tax incentive system in this regard was also raised in a document prepared by the Tax Reform Committee (TRC) of which Statia was a member.
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 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 also 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.
The TRC said that the other major incentives tool relates to the granting of tax holidays.
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