Home Letters President Ali takes country from tax terror to tax reform
Some years ago, while on a university management consultancy in India, I came across, in one of the Indian dailies, an article on tax terrorism – over burdening the nation with taxes and/or using the tax department to intimidate people to ‘fall in line’ with government. It was a kind of terrorism.
As someone who did doctoral studies in Economics, and having also obtained a doctorate in Political Science, I understand how taxes are ‘politically used’ to bring people “in line”.
It is common practice in Third World countries. Some strong-willed people tend to resist tax terror out of principle, and fight it out in the court of law and/or in the court of public opinion. Governments are known to fall as a result of tax terror. It certainly played a role in the loss of support of the Congress-led Government in India in 2014, and the APNU- led Government in Guyana in 2020.
The use of taxation in Guyana during the preceding coalition tenure and the policy of the Irfaan Ali-led administration has led me to borrow that term of ‘Tax Terror’ to apply to Guyana. It was not my creation, and it is a newly coined term in economics (as introduced in the media and academia in India) though it has not been introduced in politics as yet. My coinage in economics and politics would seemingly be the first in Guyana.
There was a rising perception during the tenure of the APNU+AFC regime that taxation was used to target certain individuals to ‘fall in line’ or ‘else’. It was also used to meet predetermined targets of revenue collection. It was tax terrorism. When the regime wanted funds (to make up for shortfall of revenues) or party donations or sponsorship of its programmes, it threatened tax audit or raised taxes. Even education and transportation were heavily taxed, although the middle class and poor could not afford the taxes. Political opponents or businesses thought to be associated with the PPP Opposition were dealt with harshly. Friends were left alone. This policy was also used by the Burnham and Hoyte dictatorships to quiet down Opposition. Those without the will to resist fell in line.
Business people always transfer the taxes and fees onto the consumers. In economics, it is called “tax transference” or transferring the incidence of tax. The poor or working class are burdened the most, with the rich hardly affected by taxation; they find ways to avoid it.
On the subject of tax intimidation, do people remember when one had to get an exit clearance or Police clearance to leave the country? That was tax terrorism also. Those wishing to travel just paid a demanded (or negotiated an) amount of taxes, even when they had no earnings. I remember as a youngster, sixteen years old, out of high school and heading to New York to attend college, I had to get tax clearance and Police clearance. And my family had to pay a bribe to get it the same day on an early morning journey to town, or else I had to make another trip from the Corentyne to town to obtain it. We were broke, but had to find the money to pay off the boys in town. The bribe was cheaper than the passage to come to town. It was also an arduous task and burdensome journey of travelling at 3:00 AM from Port Mourant to Rosignol to line up to cross the ferry on a vehicle. And it was not always safe. On the way, one could potentially be stopped by thugs and robbed on the roadway. Kick-down-the-door bandits, encouraged by some politicians, were prowling and preying on people travelling in the night. Even children and the unemployed had to get tax clearance. Without a chit from the tax department and the Police department, one could not board the plane. And if you were a political opponent, you could be denied tax or Police clearance. Some went back track through Suriname.
That policy of tax terror was done away with by the Cheddi Jagan administration when he was returned to office in 1992.
During the coalition’s tenure, tax terror returned. Taxes and fees were raised across the board in almost everything. The regime did lower taxes or fees on a few items or services, but increased it in others that raised the cost of living.
Under the coalition, people were paying much more in taxes than under the preceding regime. Revenues were at an all-time high, yet services worsened under the coalition and people were neglected on account of race and political affiliation.
Under the Irfaan Ali-led administration, there is a tax reform, hence the caption from “tax terror to tax reform”. With the interim budget that was passed in September, taxes were reduced and/or eliminated, VAT was removed from several items, and people have received a basic grant per household. There have been so many handouts and beneficial policies. And this is being given when the tax collection is at its lowest as a result of the COVID.
The Government has done much to stimulate the economy, with various grants and tax reforms to encourage private investment. Even critics and many among those who did not vote for PPP are lauding the performance of the Government.
This policy of lowering taxes and giving people some grants is needed at this time in order to stabilise the economy while stimulating economic activities. It would eventually pay its way out through collection of a reasonable rate of taxes and fees.