GRA boss hints tax credits may soon be implemented

Oct 10, 2017 News

– Access to exemptions to be made easier

GRA Commissioner-General, Godfrey Statia

There are two well-known truths about exemptions in Guyana: They are hard to access by some, while in others, they are often abused.
In relation to the former, the Guyana Revenue Authority (GRA) is adamant about changing this state of affairs by making access to exemptions not only easier for foreign establishments, but particularly locals.
In an interview recently, GRA Commissioner-General, Godfrey Statia noted that the Authority is usually blamed for holding up exemptions recommended by sister agencies. He commented that in the majority of instances, this is not so, since incomplete files cannot be processed.
To alleviate this problem, however, the tax boss said that the Authority has written its sister agencies as to the requirement of documents to be submitted with each application, and has recommenced meetings with these agencies with a view of minimising the time and effort needed to complete these transactions.
The tax chief assured that this will aid significantly in making access to exemptions easier.
As it relates to the abuse of exemptions, Statia has often hinted that these very exemptions may eventually be replaced with tax credits, thereby creating a level playing field for all taxpayers. He recently confirmed that the revenue authority is looking at how this can be implemented soon.
The case for tax credits was initially proposed for Guyana by some of the nation’s best tax advisors, who were contracted to be part of the Tax Reform Commission in 2015. That Commission comprised the GRA Commissioner-General, Chartered Accountant, Christopher Ram and Economist Dr. Maurice Odle, among others.
In the report which was prepared by the Commission, tax credits are noted to be a type of incentive which allows certain taxpayers to subtract the amount of the credit from the total taxes owed, and when appropriately used, encourages investment and compliance.
Unlike upfront incentives, which are hard to police, tax credits are only given upon submission of the proof of the actual activity, and hence forces the taxpayer to comply, in order to so benefit.
The Commission said, “For instance, instead of granting exemptions upfront to gold miners, an efficient tax credit regime will allow for such a credit to be granted when gold is sold to the Board.”
The Commissioners believe that this will not only encourage compliance, but will reduce smuggling and sale of the exempted fuel, thereby minimising the probability that these persons are unjustly enriched at the benefit of the state.
The Commission stressed that the current methods for granting and verifying tax exemptions consequently needs to be reformed and strengthened urgently in order to stop/control the drainage on the State’s revenues.
“It may be more prudent to require the payment of all applicable taxes upfront and for applications to be submitted for refunds, subsequently, when valid evidence is available and proper audits can be performed, or to replace the granting of tax exemptions with the granting of tax credits which can be claimed when tax returns are submitted, or a hybrid of both systems.”
The body recommended that consideration be given to phasing out, where possible, all duty and tax free allowances in favour of a system of tax credits, a principle inherent in the system of capital allowances.
Statia had told Kaieteur News that he is a proponent for tax credits being applied in Guyana. He holds the view that there is a strong case for it here.
He had said, “They are simple and easier to administer. They allow you to comply before you get the tax credits. If you move away from exemptions and give tax credits, life would be easier, so long as it is administrated in the right way. But to move in that direction, you need your IT system in place and your people need to be schooled in it. But that is easy.”
Statia said, however, that while a strong IT system needs to be in place, tax credits can be implemented almost immediately for corporate taxation (which involves imposing a tax on the net income of a company).
The GRA Commissioner-General said that tax credits, for example, can be applied to the gold sector. Statia said that he has already discussed this matter with gold miners and “I think they are coming around to it as being the most ideal thing for them.”

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