Businesses paying needless tax penalties due to non-compliance

Commissioner-General of the Guyana Revenue Authority (GRA) Godfrey Statia yesterday lamented the failure by local businesses to remit deducted taxes on time, saying that their non-compliance results in needless penalties.

While many businesses deduct money from their employees for taxes and National Insurance Scheme (NIS) contributions, many also convert the deductions to their own use, he said.

“Too many business fall prey to needless penalties because of non-compliance, and use taxes collected on behalf of the state as a cash flow. PAYE, NIS and VAT are taxes that are first in line against all other creditors, yet many businesses do not timely remit them on the required due dates,” Statia told a Guyana Manufacturing and Services Association (GMSA) business luncheon at the Georgetown Club, where he was the guest speaker.

“Many requests for tax refunds by employees are denied because of nonremittances,” he added.

But while on one hand businesses deny their employees rebates when they do not submit deductions, Statia noted that many small businesses also do not adequately utilise the various tax concessions available under the Acts here for lack of familiarity with them.

And until tax exemptions are replaced with tax credits, Statia urged businesses and especially small businesses to educate themselves on the various Acts for their business’ use.

“Until the advent of an Investment Code where tax credits are 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 begging, and the various allowances under the Income Tax In Aid of Industry Act 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 utilised,” he stressed.

“It is a known fact that exemptions are abused and may eventually be replaced with tax credits, thereby creating a level playing field for all taxpayers. The Authority is aware that it spends too much of its resources policing this activity, which could be better spent in efforts at widening the tax net,” he added while noting that the GRA is usually blamed for holding up exemptions recommended by sister agencies.

However, he said that in the majority of cases the blame is wrongfully cast, since incomplete files cannot be processed.

In an effort to ease this problem, the GRA has written to sister agencies as to the requirement of documents to be submitted with each application, and have recommenced meetings with those agencies, in the hope of minimising the time and effort needed to complete specified transactions.

The tax agency is also working with the public to inform them on lawful tax practices and maximising the access to tax refunds and concessions.

Statia used the forum to sound a warning to members of the private business community not only about non-compliance, but to also put them on notice that with growing offshore tax evasion, Guyana was tapping into global scrutiny mechanisms and they can be caught.

Statia said that many businesses engage in activities, knowingly or unknowingly, without considering that taxation is now global and that offshore tax evasion is a serious problem for jurisdictions all over the world.

He said on a worldwide scale, it has been found that vast amounts of money are kept offshore and go untaxed to the extent that taxpayers fail to comply with tax obligations in their home jurisdiction.

But he was quick to add that Guyana can and will access tax information through the Inter-Governmental

Agreement (IGA) governing the United States Foreign Account Tax Compliance Act (FATCA) and the Global Forum for Exchange of Information and the implementation of the Automated System for Customs Data (ASYCUDA). As a result, he said Guyanese need to become familiar with the global systems for scrutiny when making business decisions.

He said that following discussions with the United Nations Conference on Trade and Development (UNCTAD), regarding the introduction of the ASYCUDA single window system, an agreement has been signed and training will commence shortly. Following the training, a pilot project will be launched using the John Fernandes wharf.

Through its ASYCUDA, Statia said, GRA hopes to modernise customs operations and improve revenue collection, facilitate trade efficiency and competitiveness by substantially reducing transaction time and costs and improve security by streamlining procedures of cargo control, transit of goods and clearance of goods.

Other objectives include the reduction of corruption by enhancing the transparency of transactions and promoting sustainable development by cutting down on the use of paper, through the use of electronic transactions and documents.

“Tax avoidance schemes, transfer pricing, over/under invoicing, related party transactions and beneficial ownership schemes (just to mention a few) previously practiced with impunity are now scrutinised and the information shared. Despite having only 12 tax treaties and one tax exchange of information treaty with the USA, with the implementation of ASYCUDA, coupled with the signing of the IGA allowing for reporting under FATCA rules, and with Guyana’s membership of the Global Forum for the Exchange of Information, many loopholes will be closed or minimised,” Statia warned.

“The world has changed and we should change with it. As the world becomes increasingly globalised and cross-border activities become the norm, tax administrations have been working together to ensure that taxpayers pay the right amount of tax to the right jurisdiction. The way businesses conduct their affairs are now under worldwide scrutiny with the advent of Fair and Accurate Credit Transactions Act and the Automatic Exchange of Information through the Global Forum (AEOI). The availability of “beneficial ownership” information is at the forefront of the international agenda on tax transparency and is a vital part of the international standards of transparency and exchange of information for tax purposes, both automatic and on request,” he added.