IMF urges review of Guyana’s income tax system

A revealing assessment report from the International Monetary Fund (IMF) has shed light on deficiencies in tax administration systems in operation in Guyana and other countries in the Caribbean Community (Caricom).
The IMF found there is need for revenue authorities to review decades of incremental tax changes that have needlessly complicated personal income tax (PIT) systems. This review, the report notes, must be a fundamental one.

The report, which originated from the IMF’s Fiscal Affairs Department out of an assessment that began earlier this year, noted that PIT systems “generally comprise multiple allowances and deductions that hamper the implementation of efficient filing (and) payment arrangements; (for example) prefilled tax returns or withholding at source as a final tax.”
“A complex PIT system has two consequences: it deters voluntary compliance (the no-filing rate is above 50 per cent in the region), and it consumes an important workforce to provide immediate assistance, follow-up on no-filers, and enforce collection.”
The report also stated that normal Value Added Tax (VAT) and income tax regimes have not adapted to the limited compliance capacities of small and micro businesses. The report notes that this is especially so in low and low-to-middle-income countries.
According to the IMF, tax authorities impose proportionally higher compliance costs on this segment. In turn, this impacts overall filing and payment rates. A less-than-satisfactory rate of tax collection in Guyana has been highlighted in the past, most notably by the Audit Office of Guyana.
“Only a few countries have introduced, or have planned to introduce, a genuine turnover-based presumptive tax regime with minimal accounting requirements for small businesses. In those countries, this initiative is synchronized with the increase of the VAT registration thresholds.”
The report noted the necessity of overall reforms, but observed that authorities are distracted; and, as such, the question of reforms does not receive sufficient attention and resources. It notes that before reforms can take effect, a number of changes must be made.
“Experience shows that adopting this model without strengthening headquarters’ functions, shifting to a functional approach, introducing taxpayer segmentation, improving compliance and performance management, enhancing data exchange, and modernizing IT systems has had limited or no impact on revenue mobilisation,” the report states.
Tax returns in Guyana
In Guyana, the Auditor General’s 2016 report had revealed that over 70,000 self-employed persons escaped the Guyana Revenue Authority’s purview last year. Auditor General Deodat Sharma had noted that as of December 31, 2016, only 18,337 filed returns.
These income tax returns totalled some G$4.045 billion. However, there were 92,326 active self-employed persons registered in the GRA’s database, meaning this sum was derived only from 20 per cent of this category filing their returns.
While GRA’s systemic weaknesses were the highlight of the report, the tax authority, in a statement after the IMF assessment was published, had committed to advancing reforms.
According to manager of the GRA’s Public Relations Unit, Melissa Baird, it was Commissioner-General Godfrey Statia who requested an assessment from IMF’s regional Technical Assistance Centre, and some of the issues highlighted are a work in progress.
“In September 2016, CARTAC alerted that such a service (TADAT) was available through the IMF. The IMF did its TADAT assessment, and in its report of May 2017 outlined the GRA’s main strengths and weaknesses.”
“Upon the receipt of the said report, a request was made for a follow-up study to advise on the next steps in modernizing the Authority. This assessment was done in September 2017, and a draft report was submitted in October 2017. Like in the TADAT report, this final report will be made available when released.”