Agencies should publish annual reports of tax holidays granted, investment agreements - Committee

Agencies should publish annual reports of tax holidays granted, investment agreements – Committee

Mar 19, 2017 News

The Tax Reform Committee (TRC), which was established by the Government, has recommended a number of ways in which the system governing tax holidays can be strengthened so as to prevent the abuses of the past.

GRA Commissioner General, Godfrey Statia

In this regard, the Committee suggested that the relevant agencies could provide tax incentives through tax laws which must be based on clear and rational criteria and reduce ministerial discretion to an absolute minimum.
It said that agencies should also publish an annual statement on tax expenditures and revenue foregone while noting that this in itself inhibits arbitrary and willy-nilly granting of incentives and related corruption.
Based on systematically collected data, the TRC said that efforts should be made by the government to undertake periodic reviews of the tax incentive system and its costs and benefits, in the context of stated government objectives.
It said that the government should also perform an annual audit of the concessions granted to companies and or individuals to determine if renewal would be recommended.
The Committee said in its comprehensive report that it strongly recommends that the relevant agencies publish annual reports of tax holidays granted and investment agreements entered into.
Furthermore, in its reform of the structure of Investment Agreements, the Committee said that the Government could usefully include the consideration of the investment priority categories in the Priority Lists required under section 36 of the Investment Act. The members of the Committee also said that the Government should also establish clearer parameters and guidelines for entering into of Investment Agreements, so as to reduce the discretionary powers of the Minister.
The Committee also suggested the introduction of a post-audit system for concessions granted including the posting of a bond/guarantee to ensure that commitments are met.
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 said that the latter conditions may be expressly stated in the form of performance requirements for the receipt of the incentives.
Furthermore, 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.
In addition, it said 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.
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, Commissioner General of the Guyana Revenue Authority (GRA) Boss Godfrey Statia and Dr. Thomas Singh.