After five hours of intense debate yesterday, the National Assembly referred a sweeping tax reform bill to a select committee of Parliament from which a report is to be submitted by Monday.

The Fiscal Enactments (Amendment) (No.2) Bill 2003, was the third bill to be referred to a select committee yesterday.

The bill, which was read a second time in the House last night prior to referral to the committee, proposes radical tax changes to a number of laws including the Financial Administration and Audit Act, the Customs Act, the Tax Act, the Consumption Tax Act, the Travel Voucher Tax Act, the Income Tax Act and the Motor Vehicle and the Road Traffic Act.

Among the major points of contention yesterday are the proposed increase in professional fees from the present $10,000 per annum to a graduated $250,000 to be implemented fully by 2006, the presumptive method of taxation for the self-employed and the ten percent service charge payable on a range of services, including those offered by hotels and real estate agents.

Strong opposition came from the People’s National Congress Reform (PNCR) whose leader Robert Corbin stressed that his party was not against the noble intentions of the bill, but had reservations over the possibility that the very mischief the bill hopes to curb - tax evasion - will be bolstered because of the “draconian” measures included therein.

He expressed doubts over the ability of the Guyana Revenue Authority (GRA) to effectively collect the $250,000 fee from those whom at present do not pay the $10,000 fee.

Corbin added that it was not the providers of professional services who will feel the impact of the 10% service fee, but the users of the services.

During his presentation, Corbin said that he had written to President Bharrat Jagdeo recommending that the bill be moved to a Select Committee for further consideration.

Minister of Finance Saisnarine Kowlessar in moving the bill yesterday said that with the increase in competition among service providers, the fees for their services will eventually even out, adding that the increase proposed by the bill will not be passed on to the consumer. He also pointed out that the presumptive method of taxation is internationally accepted and tested. The minister mentioned that there was already a presumptive method used for gold miners.

Clause 13 of the bill would allow the minister to utilise a presumptive method of ascertaining the taxable income of self-employed persons who have an annual turnover of less than $10M.

Under the presumptive method, annual taxable income will be fixed by utilising factors such as the size of business premises, number of employees, assets employed in the business, education, training, years in practice and the salaries of comparably employed persons. The method would specify a standard deduction for each category.

Taxes assessed by this method would be payable on the first day of each tax year although regulations may allow the payment of the liability in instalments. Clause 13(6) says regulations may phase in the presumptive tax beginning with select categories of taxpayers and then broadening this.

The presumptive method which had been referred to in this year’s budget speech is intended to address the longstanding concerns that the self-employed are not paying taxes or are vastly under-reporting their earnings.

The bill also seeks to amend the First Schedule of the tax act to gradually hike fees for practice certificates to $250,000 per annum by 2006. The current fee is $10,000 and has not been adjusted for some time now. Those who will have to pay the new fee are accountants, architects, auditors, dentists, engineers, legal practitioners, medical practitioners, optometrists, pharmacists, physiotherapists, surveyors and veterinary surgeons.

For next year, the applicable categories will pay 35% of the fee, 70% the following year and finally $250,000 for practice certificates issued in 2006.

Clause Six of the bill slaps a 10% tax upon the gross sum paid in respect of services of any hotel which is subject to the Hotel Accommodation Tax Act 1993. The only exception will be gambling activities. A 10% tax is also to be applied to the gross sum paid in respect of services by professionals listed in the preceding paragraph in addition to real estate agents. For the purposes of this provision a real estate agent is defined as a person “engaged in the business of brokering real property for sale or lease in exchange for commissions on completion of the sale or lease, or otherwise arranging for the matching of buyer and seller or lessor and lessee in a commercial transaction involving real property”.

Clause 3 of the bill seeks to remove the broad discretion in granting tax remissions. This wide discretion has been severely criticised. Clause 3(1) says “save as may be expressly provided by any law for the time being in force, no expenditure involving a charge on the revenue shall be incurred; nor shall any sum due to the revenue be remitted, unless the minister is empowered by the specific provisions of the relevant tax act”.

Clause 21 amends the Income Tax (In Aid of Industry) Act to offer exemptions from corporation tax to investors in depressed regions for certain types of business.

The minister may grant an exemption from corporation tax with respect to income if the “activity demonstrably creates new employment” in Region 1 (Barima/Waini), Region 8 (Cuyuni/Mazaruni), Region 9 (Upper Takatu-Upper Essequibo) and Region 10 (Upper Demerara-Upper Berbice).

The activities which could benefit from the corporation tax ease are non-traditional agro-processing (excluding sugar refining, rice milling and chicken farming); information and communications technology (excluding retail and distribution); petroleum exploration, extraction or refining; tourist hotels or eco-tourist hotels.

Exemption from such a tax shall not exceed five years though for some businesses it may be as long as 10 years. Tourist hotel means one having at least 30 rooms and eco-tourist hotel means a tourist hotel intended to attract persons who have an interest in the natural environment and wildlife of Guyana.

(See more on yesterday’s debate in tomorrow’s edition) (Johann Earle)