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Over 70, 000 self-employed citizens escaped GRA’s tax net last year –AG
The Guyana Revenue Authority (GRA) continues to experience difficulties in getting delinquent self-employed persons to pay their fair share of taxes. In fact, over 70,000 self-employed citizens escaped GRA’s tax net for last year.
Auditor General, Deodat Sharma
This was highlighted by Auditor General, Deodat Sharma in his latest report.
As at 31 December 2016, Sharma said that there were 131,893 registered self-employed persons in the GRA database of which 92,326 were identified as active. However, only 18,337 persons or 20% of the active registrants filed returns. Therefore, a total of 73,989 persons or 80% of the active registrants did not file their tax returns. Sharma said that similarly two years ago, 78,993 persons did not file their returns.
The Revenue Authority has since explained that in light of the number of self-employed taxpayers not filing returns and the limited resources at the disposal of GRA, it has adopted a risk management approach to prioritize the high risk taxpayers with great revenue implications.
GRA said that demand notices are issued to defaulting self -employed taxpayers on a continuous basis. In addition to this, the authority said that it raises assessments in the absence of the returns in some instances.
Furthermore, GRA said that during the period January 1, 2016 to December 31, 2016, a total of 18,543 demand notices were sent to defaulting self-employed taxpayers.
In addition, four cases were sent to the Legal Services Division for action to be taken for failure to submit tax returns.
With the aforementioned in mind, the Audit Office recommended that the Authority pursue all possible avenues to have delinquent self-employed persons comply with the requirements of the Income Tax Act with a view of maximizing revenue collection.
Statistics provided to the Tax Reform Commission (TRC) tell a depressing tale of the history regarding tax evasion among self employed professionals, particularly, doctors, accountants and lawyers, the overwhelming majority of whom, declare gross income well below $10 M per year.
The Commission during its review of the tax system last year, noted while in Guyana the situation has improved somewhat with the self-employed contribution to tax revenues increasing from 0.56% of tax revenues in 1992 to 2.56% in 2014, given the prevalence of the self-employed in the economy that percentage has to be considered negligible.
The Committee said that one measure of relevance is a comparison of the taxes paid by the self-employed compared to the taxes paid by employed persons. The Committee in this regard exposed that self-employed persons paid $3.5B in income tax in 2014 while employed persons paid some $18 B, in other words, more than five times as much. This was the sorry case in 2014 but the gaps between the two groups in preceding years were worse.
In order to address this problem, the Commission noted that the Government had introduced legislation in 2003 for the use of presumptive taxation to address the self-employed.
The members of the Committee noted that a World Bank Paper notes that presumptive income taxation is employed primarily in economies where ‘hard-to-tax’ taxpayers comprise the majority of the population and administrative resources are scarce.
It said that many of the persons affected are either unable or unwilling to maintain the books and records required by the tax authorities, including for example the Income Tax (Accounts and Records) Regulations, published under the Income Tax Act.
The World Bank considers presumptive taxation to be “an optimal method of curbing widespread non-compliance without employing excessive government resources because it addresses the concerns of both taxpayer and tax authority. Presumptive taxation provides taxpayers with a simplified option for tax compliance without requiring full financial transparency.”
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