Norton calls on Govt. to plug ‘abusive’ tax exemptions

Jan 16, 2022 News

Kaieteur News – Citing the economic crisis prevailing in oil-rich Guyana, with the steady increase of cost of living, despite numerous oil and gas discoveries coupled with predictions of Gross Domestic Product (GDP) growth by the World Bank and other financial institutions, Leader of the People’s National Congress Reform (PNCR), Aubrey Norton has called on the government to plug what he described as the abuse of tax exemptions.

Leader of the PNCR, Aubrey Norton

Norton made the call on Friday during his political party’s weekly press engagement.
The party leader was at the time making recommendations to the governing People’s Progressive Party Civic (PPP/C) on budget 2022, which is expected to be presented soon.
Among the suggestions given by Norton was the need for tax exemptions to switch to tax credits, an idea that was touted since 2017 by the Guyana Revenue Authority’s Commissioner General, Mr. Godfrey Statia.
While he did not make reference to tax exemptions for a particular sector, the party leader reasoned, “We support the Commissioner General of the GRA calling for a review of all tax exemptions granted (and) for a switch from tax exemptions to tax credits. This method will plug the widespread abuse of tax exemptions, while garnering additional domestic revenue.”
According to the GRA website, “As an individual or business you may pay little or no tax, that is, Customs Duty, VAT (Value Added Tax) or Excise Tax if you are importing items as a manufacturer, a pharmacist, a large scale miner or if you have an investment agreement with the Government of Guyana. Likewise, if your business makes use of local forestry products such as lumber, sand, stone, etc., you will be allowed to claim the VAT paid even though you will not be allowed to charge your consumers VAT.”
Only on Thursday, Publisher of the Kaieteur News, Mr. Glenn Lall moved to the Courts to mount a legal challenge against oil giant ExxonMobil and its partners, Hess Corporation and CNOOC Petroleum Guyana Limited in light of the most repressive tax provisions of the Stabroek Block Production Sharing Agreement (PSA).
The case which was prepared and filed by his attorney-at-law, Mohamed R. Ali, outlines that many of the provisions listed under Article 15.1 of the Petroleum Agreement, dated June 27, 2016 between the Guyana Government and the oil companies, grant exemptions to persons other than the licensees, which violate the Petroleum Exploration and Production Act, the Financial Administration (and Audit) Act, the Prevention of Discrimination Act, and the Constitution.
The Auditor General, Deodat Sharma in his 2020 report highlighted that Guyana lost a whopping $137 million in tax exemptions from the oil sector alone. Statia has already warned that these deductions will continue to increase, unless policy changes are made.
Back in 2017, the GRA boss hinted that tax exemptions may eventually be replaced with tax credits, thereby creating a level playing field for all taxpayers.
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 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 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 Commissioner believes 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.