GRA mulls radical shake-up of tax exemption system

– considering implementing tax credits to create “level playing field”

The days of tax exemptions may be winding down, with the Guyana Revenue Authority (GRA) revealing that it is considering radical cut backs on the system and replacing it with tax credits.
GRA Commissioner General Godfrey Statia made this announcement at a business luncheon hosted by the Guyana Manufacturers and Services Association (GMSA). Statia cited the historical abuse of the system and the results of the 2016 Tax Reform Commission. According to the finance specialist, replacing exemptions

with credit would assist in creating a level playing field.
“It is a known fact that exemptions are abused and may eventually be replaced with tax credits, thereby creating a level playing field for taxpayers. The Authority is aware that it spends too much resources policing this activity (exemptions), which could be better spent widening the tax net and improving tax efficiency.”
Instead of reducing taxable income, tax credits actually reduce the amount of taxes owed. But while tax exemptions are still available, Statia was critical of some businesses not taking advantage of them.
“Many businesses also do not adequately realise various tax concessions available under the Act. Until the advent of tax credits, maybe introduced instead of exemptions, businesses must trudge through the various Acts, small businesses in particular do not reap the rewards available under the Small Business Act.”

“Exemptions go a begging and the various allowances are often not utilised. Yet, complaints are made when foreign companies benefit and local companies do not. These are available to all competitors in the market and should be used.”
In 2015, the Government had established the Tax Reform Committee headed by Dr Maurice Odle. The Committee’s mandate was to examine the country’s taxation system and make recommendations for fixing it. The Committee had reported its findings to the Finance Minister in January 2016.
Among its recommendations were an Income Tax threshold of $750,000 with progressive rates of taxation from 20 per cent to 35 per cent, reintroduction of estate duties and levies on tobacco and alcohol.

Red tape
Meanwhile, Statia defended the Authority against reports of the sloth and red tape businesses encounter when trying to access tax exemptions. According to Statia, in some cases, incomplete files are sent from the recommending agency to the GRA.
“The Authority is usually blamed for holding up exemptions granted by the sister agencies. In the majority of cases, this is not so. Since incomplete files cannot be processed, to alleviate this problem, the Authority has written its sister agencies as to the requirement of documents with each application and has requested meetings with each agency with the view of minimising the time and effort to complete these transactions,” he said.
A poignant case of these reports are the tax exemptions mining operators were supposed to access. Back in 2015, the Guyana Gold and Diamond Miners Association (GGDMA) had signed agreements with the Guyana Energy Agency, the GRA and Guyana Geology and Mines Commission.
These agreements had included the granting of exemptions from customs duties on fuel and equipment for eligible miners. But with an initial lifespan of six months, miners complained bitterly that the time elapsed, with many not benefiting.
The GGDMA has said that operators were not able to benefit from the grant of duty-free concessions on mining equipment, vehicles and fuel, owing to the red tape experienced at the regulatory agencies involved.
As a result, miners have for some time been raising issues such as the spike in taxes across the board implemented by the Government; in particular, the increase of the Tributors Tax from 10 to 20 per cent, Value Added Tax on heavy-duty mining equipment and the two per cent Withholding Tax.