Govt. foregoes more than half of its tax revenues collected by GRA in 2022 – AG Report

Dec 14, 2023 News

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Kaieteur News – The Government of Guyana (GoG), through the Guyana Revenue Authority (GRA), waived $169.262 billion in taxes and duties for investors here last year.

This sum represents 56.93 percent of the actual revenue collected by the Authority for the same year, as revealed in the Audit Office of Guyana (AOG) 2022 Report.

Exemptions from duties and taxes totaled $169.262 billion for the year under review, compared to $247.632 billion in 2021, reflecting a decrease of $78.369 billion or 31.65 percent over the corresponding period.

The Auditor General Report detailed tax exemptions granted according to concession categories. Here is a breakdown of the types of exemptions and the amounts foregone: companies/businesses ($149,985,745,000), ministries/government departments ($10,800,944,000), remigrant ($2,370,230,000), churches/charitable organizations ($1,139,872,000), diplomats ($1,264,120,000), public officials/officers ($2,149,266,000), foreign funded projects ($993,447,000), Hospitals ($427,286,000) and Local VAT ($131,925,000).

While the total for these figures amount to $186,997,601,000, after deducting $17,714,806,000 in unconditional tax exemptions, the final total stood at $169,262,795,000.

Tax exemptions granted to companies and businesses accounted for 88.61 percent, equivalent to $149.986 billion of the total conditional tax exemptions granted. Significantly, tax exemptions in this category were 36.31 percent or negative $85.5 billion less than the previous year. The decrease resulted from declines in conditional tax exemptions, especially Investment Agreements facilitated through the Guyana Office for Investment (Go-Invest) and the Guyana Geology and Mines Commission (GGMC), Manufacturing, Fuel, Mining, and Fishing.

Tax exemptions granted to companies and businesses represented 88.61 percent equivalent to $149.985 Billion of the total conditional tax exemptions granted.

Notably, tax exemptions in this category were 36.31 percent or negative $85.5 Billion less than the previous year. The decrease was as a result of the decline in the conditional tax exemptions (Companies/Businesses) especially Investment Agreements facilitated through the Guyana Office for Investment (Go-Invest) and the Guyana Geology and Mines Commission (GGMC), manufacturing, fuel, mining and fishing.

Another breakdown outlined a comparative analysis of tax exemption categories for companies and businesses, including: investment agreements ($116,451,949,000), manufacturing ($3,040,804,000), non-oil ($2,071,298,000), fuel ($1,772,040,000), agriculture ($1,536,295,000), construction ($670,833,000), mining ($444,288,000), fishing ($117,248,000), aircraft ($89,109,000), forestry ($44,296,000) and public transportation ($2,765,000).

Notwithstanding the decrease in exemptions granted under investment agreements, manufacturing, and fuel, these categories accounted for 92.24 percent, 2.41 percent, and 1.40 percent, respectively. Together, they represented 96.05 percent of the total exemptions granted in 2022.

In response to the AG’s findings, the GRA Head of Budget indicated that their role concerning the tax exemptions regime is to administer various provisions outlined in the Tax Acts through which exemptions are granted. These exemptions, enshrined in law and/or policies, are non-discretionary on the part of the GRA.

The Commissioner General has advocated for the removal of the concession regime and suggested replacing it with a system of tax credits, akin to practices in developed nations, to enhance compliance with tax laws and Investment Agreement conditions. The decrease in conditional tax exemptions may have resulted from amendments to laws concerning fuels and other pivotal industries. Additionally, it was stated that the GRA cannot demand taxpayers to make exemption requests.

Moreover, the Investment Act No. 1 of 2004 Section 4(1) states, “The Government encourages and seeks to facilitate persons, either individuals or legal entities, to invest capital in Guyana on the basis of mutual benefit and observance of the laws of Guyana and international treaties or agreements to which the State or Government is a Party.” Section 3(c) highlights the objective of “promoting the development of international best practices regarding investment.”

The report also revealed that from a sample of 23 Investment Agreement applications processed, 81.82 percent of the applicants did not provide audited Financial Statements, while 9.09 percent submitted and 9.09 percent partially submitted.

As such, the financial stability of the companies who are receiving billions of dollars for projects may not be able to successfully complete these projects due to poor cash flow.  It is imperative to note that, Financial Statements provide insights of a business financial health, and gives insight into its performance, operations and cash flow. For instance, it provides information about a business revenue, expenses, profitability and debt.

Additionally, 52.17 percent of the sample applicants did not submit their Business Registration or Articles of Incorporation, making it impossible to determine the establishment year of these businesses.

The GRA clarified that effective from 2020, its role in processing Investment Agreements changed significantly as these functions were absorbed by Go-Invest. GRA’s role now primarily involves oversight to ensure that the items in draft Agreements align with long-standing government policies and tax laws. Notably, GRA mentioned conducting its review to ascertain applicants’ tax status and identify any significant anomalies before the Minister of Finance makes a decision in each case.

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• Audit Office of Guyana (AOG), Government, Guyana, Guyana Revenue Authority (GRA), revenues

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