IMF report recommends revamp of revenue collection
-Smuggling high on agenda
December 22, 2002
The Fiscal Administration Department (FAD) of the International Monetary Fund (IMF) has recommended sweeping changes to the procedures of the Guyana Revenue Authority (GRA) in order to improve tax collection.
The recommendations are included in a report submitted by a team of consultants, which visited Guyana earlier this year and the report has been forwarded to the government
The FAD suggests the appointment of a representative of the Private Sector to the board of the Guyana Revenue Authority (GRA) and that one member of the board should have a Customs background. The Minister of Finance appoints the members of the GRA board, which is chaired by the Chief Statistician and includes the Commissioner General, who is a presidential appointee, the Governor of the Bank of Guyana, the Director of the Budget, Finance Ministry, and two other persons with knowledge and experience in taxation, finance, commerce, economics, law or administration. At present there is no Commissioner General as no appointment has been made since the last incumbent, Edgar Heyligar left the post a few months ago. Stabroek News understands that these recommendations are yet to be seen by the GRA's board.
Other recommendations in the report say that the vacant post of deputy commissioner- general should be given to a person with a Customs background and the GRA should have the authority to recruit and dismiss its staff.
The organisational chart of the GRA does not at present include the post of deputy commissioner general. In the absence of a Commissioner General, Stabroek News understands that the Com-missioners of Inland Revenue and Customs and Trade Administration discharge those functions as it relates to their individual departments.
Stabroek News understands too that except for the most senior posts when the approval of the Minister is sought, the GRA can recruit and dismiss its staff in accordance with terms and conditions approved by the Minister of Finance.
The FAD says that to address the continuing concerns about smuggling there should be a high level meeting between the Customs, police and army to build better inter-agency co-operation in the fight against smuggling. This should include the signing of memorandum between the CTA and the police and the CTA and the army on Customs co-operation, the purchase of the equipment needed by the CTA to control smuggling in the Essequibo river; renovating the building occupied by the Berbice Anti-Smuggling Squad as well as re-equipping and re-staffing it.
With regard to smuggling across the Corentyne river, the FAD says, "suggestions that it is impossible to control this frontier because the international boundary runs along the high water mark on the west side of the Corentyne estuary should be disregarded. A properly equipped squad of well-motivated non-resident officers, able to maintain a watch over the estuary, can bring the situation under control. It is time to re-staff and re-equip this squad, and to renovate the riverside building they occupy."
In relation to the smuggling activities across the border from Venezuela, the FAD report says that it presents fewer difficulties, as there are indications that the Venezuelan authorities are ready to assist. However, the report says that the police and army need to be fully committed to co-operating with the CTA to stop the smuggling.
As regards the smuggling up the Essequibo river, the FAD says it "can largely be overcome if the commissioner of the CTA is provided with the necessary equipment. The requirements include one or more patrol boats, vehicles and communication equipment."
"Because of the predominance of smuggling of high-duty petroleum products in these two locations west of Georgetown, the expenditure needed should also be regarded as a sound investment. A high-level initiative is required to ensure that the police and defence forces co-operate with the CTA to fight smuggling."
The FAD suggests that the Customs and Trade Administration should be a member of, and maintain contacts with, international Customs bodies such as the World Customs Organisation and the Caribbean Customs Law Enforcement Council; and that its officers should attend important meetings of these bodies.
In a note to the report the FAD says that, "if properly connected with Customs bodies outside Guyana, the CTA will not only be a source of valuable intelligence within the country, some of which it will pass on to other government agencies, but will also be the recipient of intelligence from customs bodies and administration abroad. By international agreement and practice, this latter flow will be channelled through the Commissioner of Customs (and Trade Administration) and not the GRA as such."
The FAD notes that the GRA's Information Technology department is not only understaffed but under- resourced with the result that professional employees do not have continuous access to computers and as result their effectiveness and efficiency are compromised.
The report recommends new IT systems to "allow a considerable increase in the GRA efficiency, and effectiveness; ... promote more transparent operations; and corrupt practices would be easier to detect."
It recommends too that the Authority "prepare a strategic plan for its operations" which "should include needs for software, hardware, communications and human resources" as well as specifying the computer network as well as type of equipment required; an estimate of the initial cost and the cost of maintaining the system so as to keep the Authority up-to-date in IT resources.
As an immediate short- term measure, the Fad recommends a review of the ASYCUDA system a computerised Customs management system, including suggested changes to enable the system to produce management information, in addition to trade data, that can be used for analytical purposes.
Specific recommendations relating to the IRD include: renumbering taxpayers in its files and designing a computer programme for an automatic conversion of the old numbers into new ones; changing to 'inactive' the taxpayers who have not filed or paid taxes for the past three years if they do not have arrears; and creating a task force under the supervisor of registration to clean up the IRD taxpayer master file and provide it with the necessary resources. The task force it suggests should be asked to assign new Tax-payer Identification Numbers (TIN) to the active importers and implement new TINs in the Customs and Trade Administration.
Other recommendations specific to the IRD include eliminating the stock of refunds due to taxpayers over a two-year period, enacting legislation to provide for the payment of interest on refunds not paid on time and to allow companies to offset their current liabilities with their outstanding refunds.
Other suggestions include the introduction of a requirement for companies to file a return annually indicating payments made to the self-employed; designing a programme to notify taxpayers whose returns contain errors; repealing the requirement for the filing of returns by employees with only one source of income; the inclusion of information from national insurance numbers and the establishment of a system to process it and use it for controlling non-compliance; increasing the number of tax auditors to 100 in the medium term and increasing the number of taxpayers audited annually to 500.
Also recommended is the collection of information on vehicles and property for cross checking to detect evasion of income and property taxes subject to the secrecy laws and the rights of the taxpayers; collecting information from banks to support income and property tax audits; the introduction of a new annual return to provide for companies and the self-employed to provide information which should be processed to identify the self-employed under- declaring their income. The FAD says the staff complement in the Arrears Collection Unit should be increased from 8 to 20 so that they can double the number of cases they dealt with in 2001; setting annual, quarterly and monthly targets for amounts to be collected and cases to be concluded.
With regard to the Customs and Trade Administration Department, the FAD recommends among other things, the establishment of a team of 10-12 trusted officers to verify all Consumption Tax returns submitted within the past two years; mounting a campaign to obtain from retailers evidence of sales by manufacturers before visits are made to the manufacturers; completion of a valuation database from all available sources of information, including previously declared values, the world price of commodities, price information available on the Internet and trade catalogues.
The report also recommends regular checks to ensure goods granted remission are used for the approved purposes only and the withdrawal of concessions for importers who breach the conditions for exemption, including companies investing in Guyana and enjoying exemption privileges.
It also recommends that the Commissioner General should be asked to submit a credible plan for eliminating or reducing corruption and dramatically improving the Authority's work culture.
The FAD says too that the GRA needs to adopt a new approach to detect corrupt practices within the agency. It should receive assistance and advice in designing and implementing a new management information system to provide the Commissioner of the CTA with regular and precise information on the operations of his department.
It should engage the services of short-term advisor to adopt an appropriate approach to conducting a campaign to raise an additional 50% of revenues from registered manufacturers.