Weak collection enforcement, other loopholes at GRA cause major revenue leaks

Apr 09, 2017 News

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A review of the current Guyana Revenue Authority (GRA) infrastructure has shown that the entity has abundant material resources, and on paper, fairly good systems and procedures.

However, a broad range of problems which prevents the Authority from operating as effectively as it should, exists.
This is according to a report that was prepared by the Tax Reform Commission (TRC) which was established by the APNU+AFC Government.
According to the report, the problems plaguing the Revenue Authority include too much centralized management, with the excessive concentration of powers in the office of the Commissioner General; inefficient use of its present human resources and expertise — clerical, unskilled, technical and professional; the non or part implementation of the appropriate technology (TRIPS) leading to the ineffective use of available information to control non-compliance; weak collection enforcement; non-exchange of information or non-utilisation of the available common data base between the various collection agencies to carry out audit and enforcement; unclear priorities as it relates to collection – both arrears and current; and enforcement and audit activities.
The report also spoke to the existence of corrupt practices involving certain GRA staff resulting in tremendous revenue leakages.
Given the aforementioned, the Commission members said that this has allowed for the lack of decision-making by the various department heads, duplicity of effort and functions and gridlock. The body said that centralisation exists at all levels, where operational decisions must invariably receive the approval of the Commissioner General or the Deputy with consequential loss in confidence by staff below these positions.
The report said that the prime taxes collected by the GRA, with the notable exception of Customs Duties and Excise Tax, are administered on a self-assessment basis which assumes a level of honesty and integrity by taxpayers.
The Commission members said, “For example, less than one percent of the Corporation, Income, Capital Gain or Property Tax collected by the GRA are based on returns by the taxpayers themselves. The role of the GRA in such a system is to raise assessments, examine tax returns submitted and carry out reviews and audits thereon and to pursue those persons and entities which have not filed returns.”
They continued, “The inherent presumption of an honest body of taxpayers appears naïve at best and quite possibly dangerous. This is not unique to Guyana and even honest taxpayers seek both legitimate as well as illegitimate ways to minimise their tax payments in what may be acceptable tax planning and unacceptable and criminal tax evasion.”
The TRC added, “While sufficient, objective and reliable data are not maintained to allow firm conclusions and recommendations, the evidence that is available suggests that the work implicit in a self-assessment system by the tax administrators is not carried out or is not being carried out effectively.”
The Commission said that this is this is not for the want of resources. It noted that the Internal Audit Department of the GRA has a total of 73 staff while the Authority itself has more than 15 qualified professional accountants.
“Yet, the revenues collected as a result of the work of the Internal Audit are insignificant, a result we believe of the failure to use a proper random system of audit, political influence, the high standard of proof demanded by the Court even where taxpayers have failed to maintain the minimum records required under the Income Tax Act, the ease with which taxpayers are able to produce third parties invoices, the unreliability of the work of tax consultants and widespread collusion,” the Commission members noted.
With respect to the software available, the Commission was advised that the TRIPS system has the ability to receive and store Cargo Manifest electronically, track containers from departure to arrival ports and then to final release as well as on line and manual entry of declarations.
It was also made to understand that although delivered, these relevant modules were never or only partly implemented by GRA for one reason or another.
The Commission members noted that the revenue leakages, alone, from the non-implementation of these modules are in billions of dollars, and contribute to rampant corruption within the Customs Section of the Authority.
They said that the importers who engage in the under invoicing activities are known and are allegedly in full collusion with Customs brokers, and some unscrupulous former and present GRA officers.
Through the process of information sharing, reconciliation between Customs and VAT declarations, compliance checks and visits to business premises, and revenue verification upon submission of income and corporate tax returns, the Commission said that revenue leakages can be considerably reduced.
The TRC said, “The Guyana Revenue Authority presently has a staff complement of 1,124 persons that includes a fair amount of professional accountants. However, the staff mix between clerical, unskilled, technical and professional is disproportionate between pay grades, level of responsibilities and staff complement.”
It continued, “A simple cost benefit analysis would show that more resources should be directed towards enforcement, mostly in the area of Customs and VAT, compliance of the tax laws, verification of income, debt collection and tax audits. The revenue streams from these activities are presently negligible when compared with the overall collection by the Authority.”
Additionally, the Commission said that arrears of taxes are not being quantified and payment enforced, since there is not an effective debt collection policy, and no direct linkages between assessment and collection.
The members said that the Legal department is weak, and, rather than represent the Authority in Court, cases usually engage the services of outside counsel, thereby leading to increased costs.
The Commission said that last and not least is the fear, suspicion and perception that the merit system (qualifications, performance, and experience) is not used for career advancement, or employment.
With aggrieved employees not having the benefit of the natural justice procedures afforded to their public service colleagues, the TRC said that low morale is endemic therein.

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