Tax reform study to form part of US$5.6M World Bank package
May 13, 2002
Articles on poverty
The Fiscal Affairs Department of the International Monetary fund and the Caribbean Regional Technical Assistance Centre (CARTAC) will undertake the tax reform study for Guyana as part of the US$5.6M technical assistance package from the World Bank.
The technical assistance package forms part of the US$12 million Poverty Reduction Strategy Credit (PRSC) recently agreed to between the government of Guyana and the World Bank mission headed by Norman Hicks. Approval of this Public Sector Technical Assistance Credit (PSTAC) is set for tomorrow when the World Bank's board considers the issue.
The objective of the PSTAC is to assist the government to meet the governance and poverty reduction objectives set out in the final Poverty Reduction Strategy Paper (PRSP) now before the boards of the IMF and the Bank for approval. The Bank is expected to support the implementation of the PRSP through a series of PSTACs covering a broad range of policy issues.
The technical assistance project now under consideration supports the first PRSC and two of the seven pillars that comprise the PRSP. These are to build stronger institutions and better governance and to improve safety nets. In the case of the latter, it will include retrenchment programmes and labour market and training programmes for retrenched workers for the sugar and water sectors undergoing World Bank-supported restructuring.
The specific objective of the PSTAC is to strengthen fiscal, financial and fiduciary management by the government; support the decentralisation of central government functions; strengthen local government; improve the coverage and efficiency of social safety nets and improve PRSP implementation. The first sub-component aims to strengthen the Guyana Revenue Authority (GRA) by undertaking and debating a tax policy reform study. This is to be carried out by the IMF and CARTAC.
The project profile said the tax reform study will consider revisions to the tax policy to broaden the tax base and assess the feasibility of introducing a value-added tax or other broad-based domestic goods and services taxes in Guyana. Improved tax and administrative efficiency for the customs administration through improved systems, procedures and training will also be covered. This sub-component will be fully defined following the results of the tax study to start shortly. The technical assistance is expected to aid improve systems and procedures in the GRA and prepare for the introduction of a new tax if necessary.
Subcomponent two deals with strengthening of the procurement administration. This would include drafting of rules and regulations to accompany the procurement law to be passed by parliament and having these implemented. Training will be provided on public procurement procedures and practices and support would also be given for the dissemination, printing and implementation of the new laws. The US$12M PRSC hinges on the procurement law being tabled in parliament.
A national procurement administrative board is to be established following the implementation of the law and would replace the former Central Tender board. Institutional strengthening would be provided for the new body including the drafting of standard bidding documents and procurement manuals and establishing a management information system for the new board's secretariat. Public employees would also benefit from a series of workshops, seminars and training on public procurement.
A third subcomponent covers strengthening auditing and control and this would be based on the forthcoming financial accountability assessment by the World Bank and with assistance from the Inter-American Development Bank (IDB). This subcomponent is expected to improve the timeliness, coverage and quality of audits; improve audit and loan accounting and provide assistance to the Auditor General's Department, the Accountant General's Department, the GRA and the Ministry of Finance.
Another subcomponent will cover upgrading of the payroll database used by the Ministry of Finance to include human resources data; consolidation of existing data in stand alone data bases currently used by the public services ministry. The aim of this component is to improve the accuracy of payroll data and provide improved records for human resource management. Personnel from the Ministry of Finance and the Public Service Ministry are to be trained to use the new systems.
The fifth subcomponent covers support for the government's privatisation drive and this includes managing the privatisation of the Guyana National Cooperative Bank (GNCB) and continuing World Bank support financed under the Financial and Private Sector Institutional Development Credit. The project document says that this component would assist the government to manage the transition period, following the successful privatisation of GNCB by financing the international management team and preparing the bank for handover to the new private sector owners.
Support is also to be provided to the Privatisation Unit by way of international experts and staff to complete the privatisation programme. This will include specialist advice on capital market effects and legal consultants to assist in the production of prospectuses and bidding documents.
The second component of the PSTAC supports decentralisation of government and notes that a joint government and opposition task force is to submit recommendations for decentralisation and reform of local government in June of this year. This component of the project will be specified fully once the task force submits its recommendations.
However, subcomponents cover a revenue sharing formula with technical consultants being provided to help the government develop criteria for allocation. Local government capacity to undertake asset valuation and to improve local government's ability to assess taxes as well as to improve tax collection and management capacity would also be target areas for support. The third component of the project would seek to improve coverage and efficiency of social safety nets for which the Ministry of Human Services, Labour and Social Security is responsible.
The project profile noted that there are some 55,000 beneficiaries of old age pensions, public assistance and difficult circumstances assistance but the benefit levels are low and service delivery systems are outdated and inefficient.
The programme would aim to improve the efficiency and efficacy of existing safety net programmes and would identify safety net options for potential retrenchment in sectors undergoing restructuring such as the sugar and water sectors.
The school-feeding programme is to be restructured to improve reliability and consistency of coverage and to use local catering and delivery.
Safety net options are to be developed for vulnerable groups. Under this subcomponent, an analysis of the profile and needs of target populations affected by sectors undergoing restructuring is to be undertaken and safety net recommendations are to be developed and debated. A consultant team will undertake background studies to support this component to provide an analysis of the profile and needs of target populations likely to be affected by the sectors restructuring. The team's principle focus, the document said, would be on issues facing the sugar and water sectors over the next two years. The analysis will allow for safety net options to mitigate potentially adverse impact on vulnerable groups.
The fourth component of the technical assistance would be to develop institutional capacity within the government to manage, monitor, evaluate and improve the PRSP and PSTAC's implementation. The objective is to improve capacity to generate and disseminate reliable data, involve communities to monitor the PRSP activities and impact and build an institutional capacity to undertake government monitoring and implementation of PRSP and PSTAC.
The subcomponents will include strengthening of the Bureau of Statistics through improved processes, systems training and information technology capacity.
The capacity of the Bureau to generate timely and appropriate data is currently constrained by in house research and analytical capabilities, the project document noted. It said that experts would be provided in IT, data generation and analysis. The component recognises the shortage of skilled statisticians and aims to improve the curriculum for statisticians at the University of Guyana.
Improving the coverage, timeliness, quality, quantity and use of relevant survey data and statistical output is also on the cards. Support would be provided to strengthen the enumeration and survey personnel of the Bureau through on-the-job training.
The component is to also cover assistance in the field operation to collect baseline data for the household survey of living conditions and train 2,500 census enumerators to ensure the census operation is carried out with due regard to operational details.
A public policy and planning unit is to be established to monitor and evaluate the PRSP implementations. The technical assistance project is to run for four years.