Budget speech/GRA do not make the law BUSINESS PAGE
Stabroek News
April 6, 2003

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In an advertisement appearing in both the Chronicle and the Stabroek News of Saturday 5, 2003, as an order of the Commissioner, Internal Revenue, the Guyana Revenue Authority is seeking to put into effect the proposals on taxation contained in the 2003 Budget Speech by the Minister of Finance. Business Page can find no authority for this unprecedented action which Plain Talk guests today, MPs Sheila Holder, Winston Murray and Ravi Dev, describe as completely illegal and which therefore can be ignored. It is truly an act which defies law and logic, shows an unfamiliarity with the steps necessary to enact law and demonstrates a lack of respect for individual taxpayers.

While part of the problem is the loss of institutional memory this can be no excuse for the still headless GRA to pretend to the public that it has authority to impose taxes outside of those properly provided for in the tax laws. There are two ways in which new taxes can be imposed - by Order or Regulations if such authority is conferred on him by the relevant Act, or by way of amendment to the Act. It would be a derogation of the supremacy of Parliament for anyone else to do otherwise.

During his presentation, the Minister announced:

* “a 10% tax on all domestic telephone calls... effective April 1, 2003.” He also announced “an increase in withholding tax from 15 per cent to 20 per cent, on interest bearing deposits, loans secured by bonds, and any other interest income that is currently being assessed at 15 per cent;

* “the increase in withholding tax, from 10 per cent to 20 per cent, on payments other than interest to non-residents. These measures take effect from April 1, 2003;”

* “an increase in the income tax threshold from $216,000 to $240,000 per annum, effective from Year of Income 2003.”

In the past, on the day of the Budget presentation, the Minister would introduce a Bill containing the provisions announced in his speech. He would also table subsidiary legislation which can have immediate effect if so authorised by law. This may apply for example in respect of licences and fees and certain indirect tax rates. On the other hand, those that require amendments to Acts can only become effective when the legislation is assented to. Retroactive legislation imposing a tax is considered bad law and some of the measures announced first by the Minister and now by the GRA as effective April 1, 2003 fall into that category. As far as Business Page is aware, the Bill to give legal effect to those intentions does not appear on the Order Paper for the next session of Parliament.

In the absence of the amendments to the legislation, it would be entirely proper for taxpayers to act on the basis of the unamended law regardless of the Order of the Commissioner of Internal Revenue. What appears to have happened is that revenue targets are likely to be missed because of the late presentation of the Budget and the absence of the relevant legislation, and there is a desperate attempt to recover. But that is the cost this country pays for poor administration and it is unfortunate that the GRA could think that they could get away with what they are attempting to do.

The GRA must know that the personal allowance and the rates of tax payable under the Income Tax Act are set out in different sections of the Act and it is a marvel of imagination to represent to the unsuspecting public that an amendment to one section automatically extends to another. What the government is seeking to do is limit the tax savings of everyone to no more than $400 per month. It is unbelievable that a government committed to the working class can be so insensitive to their plight when one considers the effect of inflation even using the official statistics. Let us take an example of a person who had a net income of $25,000 per month in 2002 all of which was spent. That person’s net income will go up by $400 per month but the same expenditure basket would now cost him $26,525. He is now worse off by $1,125 per month! Did the government consider this? So much for the consultations with the TUC.

Withholding tax
In addition to the effective date issue pertaining to the withholding tax proposals, there are two other matters which are to be resolved. The first relates to whether it applies to withholding tax on payments to non-resident contractors under Section 10(b) of the Corporation Tax Act. Neither the Minister nor the GRA give any indication that this has been considered and the public is left guessing.

The other issue is whether the proposal applies to payments made after April 1, 2003 or to liabilities arising after April 1. For example, how does the proposal affect a management fee in respect of the month of March paid in April? Should withholding tax be paid at the new, higher rate or at the rate prevailing when the liability for the payment of the management fee arose? According to our headless GRA, they are quite clear on the matter that all payments (other than interest) made to non-residents would be subject to tax at 20 per cent.

It takes no consideration of accruals made for payments but not yet paid for periods ended March 31, 2003 and if it is logical that these payments be subject to a higher rate of tax. This is the sort of clarification which one would have expected from the GRA and which could legitimately be considered extra-statutory concession.

Business Page understands that the telephone service providers had no prior notice of the consumption tax on local calls and were therefore given one working day to make the necessary amendments to their billing programme. Is this the “support for the private sector” the Minister described as a priority in his speech?

The advertisement is most unfortunate and will do little for the respect which the public has for the GRA. Most people consider the system inherently unfair with the self-employed getting away with gross evasion while the employed person bears the brunt of the tax burden. The GRA must be seen to operate within the spirit and the letter of the law and refuse to compensate for the gross oversight of those concerned with the preparation of the Budget and its appendages.

If the GRA is serious about going after the tax dodgers who are generally well known, then it must demonstrate that it is committed to proper behaviour. It will end up with egg on its face if someone was to challenge this unusual order.

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