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Guyana a leading country for tax exemptions – Tax advisors
Tax reform usually starts out with the intention to make a nation more progressive. It appears,
GRA Boss, Godfrey Statia
however, that Guyana’s leaders have done quite the opposite. Some six years ago, tax measures were implemented by the former regime which opened the floodgates for increased exemptions and remissions.
In fact, tax advisors are saying that the move was one that has made tax administration difficult and revenue loss significant.
Guyana now stands to be one of the leading countries with massive overlay of tax exemptions and remissions. Tax advisors are calling for a major reduction in the incidence of tax holidays.
Speaking to the genesis of the former regime’s actions, the Tax Reform Commission which was established by the Granger administration said that between 2009 and 2013, two comprehensive studies on Guyana’s tax system and its administration were conducted. They opined that fundamental reform measures were proposed in both of these studies but the recommendations were not implemented.
Instead, in 2011, the PPP Government undertook major tax policy reversals when the Fiscal Management and Accountability Act of 2003 was amended to introduce more exemptions and remissions into the tax system.
The Commission members said that countries have generally been slow to roll back tax incentives, partly because it has been very difficult to determine whether the incentives are having the desired effect or not, in the absence of data that would facilitate serious research and investigation.
NICIL Chairman, Dr. Maurice Odle
The advisors said, however, that a consensus has been slowly emerging that outside of, for example, light manufacturing activities and internet-based call center backroom services, tax incentives are not very effective in attracting foreign investment and merely result in a “race to the bottom”.
The Commission also highlighted the strong views held by the International Monetary Fund, World Bank, the Organization for Economic Co-operation and Development (OECD) and other international institutions that countries such as Guyana, should focus more on the classical determinants of investment that are possibly within their control, along with other factors that facilitate ‘doing business’ and rely less on tax incentives.
Besides size and factor resource endowment, the international organizations believe that determinants of investment should include consistent and stable macro-economic and fiscal policy; political stability; adequate physical, financial, legal and institutional infrastructure; effective, transparent and accountable public administration; skilled labour force and flexible labour code governing employer and employee relations; availability of adequate dispute resolution mechanisms; and foreign exchange rules and the ability to repatriate profits.
The Tax Reform Commission included the likes of Chartered Accountant, Christopher Ram, Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia, NICIL’s Chairman, Dr. Maurice Odle and Economist, Dr. Thomas Singh.
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