Head of inland revenue welcomes presumptive tax proposal
By Gitanjali Singh
Stabroek News
April 7, 2003
The Commissioner of Inland Revenue, Khursid Sattaur, has welcomed the budget announcement to legislate presumptive taxes on the self-employed and says such legislation would bolster his department's drive to broaden the personal income-tax base.
A presumptive tax estimates income for particular categories of self-employed persons such as lawyers and doctors and requires payment of taxes based on this amount thus helping to eliminate tax evasion. It can also be applied to small businesses.
Sattaur is tasked with bringing in an additional $309M in taxes from the self-employed category this year, taking total taxes from this category to $1.079B, an increase from four per cent of total tax revenues to 5.6%.
Sattaur expects that he would be in a position to go after this category and impose the presumptive taxes shortly, once the legislative mechanisms are effected to allow him to do so and bases are established to effect the tax. He anticipates that the presumptive tax measures would begin to bite this year and would have a heavier impact next year.
While he believes the presumptive taxes would be a success in increasing the tax flow to the government, its success, he says, would be greater if it is introduced with the widespread use of the taxpayers' identification number (TIN). This would facilitate a paper trail to allow for an efficient collection of payable taxes.
Finance Minister, Saisnarine Kowlessar, in the national budget presentation last month announced the introduction of presumptive taxation, saying the Income Tax Laws would be strengthened to do so.
However, it is not clear whether a draft amendment is available to the Income Tax Act for it to be acted quickly upon. Kowlessar could not be contacted for a comment on the issue.
Currently, there are only 35,000 self-employed persons filing returns with the IRD and it is estimated that this is just 50% of the self-employed in Guyana. The $770M collected last year from this category is seen as a mere fraction of the taxes which should be collected.
The International Monetary Fund (IMF) Fiscal Affairs Department in a study on reforming Guyana's tax system last year said the "extent of tax evasion by professionals and the lack of enforcement of tax laws in Guyana is astounding".
That report found that in 2001, only 247 professionals paid the annual professional fee of $10,000(US$53). When the fee was first introduced, in local dollars it was equivalent to US$5000 and the IMF recommends that the professional fee be increased to reflect US$5000 per annum.
The IMF recommended the imposition of a minimum tax on professionals until the Guyana Revenue Authority can effectively collect regular income tax from this group. It advised that any tax on assets or sales would be evaded and a lump sum amount should be levied instead.
The Fund suggested that the GRA establish bases on which to tax professionals at 33.3% and advised that the entry-level salary of a similar professional in the civil service could be used.
According to information garnered by the IMF from respective professional associations, there are 337 doctors, 48 accountants, and an estimated 500 lawyers in Guyana. However, the IMF said the figures seem to be low.
Sattaur notes that he has used all of the means available at his disposal to go after the self-employed, including moral suasion, public relations and threats. But none has been effective to date. He says the presumptive tax measures are long overdue.
Income tax is budgeted at $19.3B this year from the $18.8B collected in 2002. The IRD may lose close to $300M by the raising of the tax threshold but would gain this back from increases in the withholding taxes, which are budgeted at $1.5B this year from $1.3 billion last year. Personal income tax would reflect 49% of collections this year, from 46% in 2001. Consumption taxes are also budgeted to increase from $14.6B to $15.7B. There is also a marginal increase in travel taxes budgeted.
However, income tax from companies is budgeted to decline from $8.8B to $8.3B this year.
