Key provisions of a sweeping tax reform bill drew strong criticism from the PNCR on Wednesday over concerns that the authorities would not be able to collect the extra tax envisaged and the “vagueness” of some provisions.

The bill was referred to a Select Committee of Parliament after exhaustive debate and amid strong indications from the main opposition party that it would not support the bill.

The Chairman of the Select Committee is the Minister of Finance Saisnarine Kowlessar, while the other members are Minister of Housing and Water Shaik Baksh, Attorney-General Doodnauth Singh, Minister of Tourism, Industry and Commerce Manzoor Nadir, Minister of Health Leslie Ramsammy and People’s National Congress Reform (PNCR) members E. Lance Carberry, Deryck Bernard, Volda Lawrence and Stanley Ming. The committee is to meet at 2 pm today at Parliament Buildings, Georgetown. It is to issue its report on the bill on Monday.

The debate on this bill commenced at 4 pm at the Ocean View Convention Cen-tre, Liliendaal, and ran until 10 pm, with two half-hour breaks for snacks and dinner.

Leading the charge for the opposition was PNCR MP Jerome Khan who called the proposed 10% tax on services as a tax on consumers disguised as a tax on professionals. He argued that it will have an immediate inflationary effect.

This was one of the more contentious measures proposed by the bill which had its second reading before being sent to the committee.

He made the point also that the very professionals from whom the Guyana Revenue Authority (GRA) has difficulty collecting revenue are the persons to be charged with the responsibility to act as collecting agents for the administration.

Khan called the provisions in the bill “vague” stating that it had no sanctions or procedures on how the system would operate. “If the current argument is that proper returns are not filed, how can we expect that the service entities will be diligent in remitting the 10% service charge?” he queried. The cost of administering the system, Khan said, will be greater than the revenue expected to be brought in.

He added that the guidelines for determining how a person is taxed presumptively are vague and more time should have been spent on developing them. He queried what was meant by ‘standard deduction’ mentioned in the proposed amendment to the Income Tax Act.

He called the phased hiking of the professional fees payable by a range of professionals to $250,000 “too steep and unrealistic given the current economic climate and prevailing marketplace,” even if it is brought in over a three-year period. “The PNCR therefore cannot support such an increase as it is unconscionable,” Khan said.

On the proposed amendment to Section 5 of the Motor Vehicles and Road Traffic Act, Khan was of the opinion that the Minister of Finance could arbitrarily use his powers vested under the Financial Administration and Audit Act to grant remissions to persons.

He said also that there was no redress for persons who might feel that they were treated unfairly.

The amendment, Khan states, does not address the matter of who makes the determination of eligibility, although it confers the authority to carry out the functions of granting waiver of remission to remigrants.

Khan argued that under the proposed amendment to the Income Tax (In Aid of Industry) Act, the Minister has wide, sweeping powers. He stated that “...the Minister may grant an exemption from Corporation Tax with respect to income from economic activity qualifying under one of the following circumstances.” Khan said that by definition such authority is discretionary.

He stressed that the PNCR supports the initiative of promoting economic activities in Regions 1, 8, 9 and 10 but has concerns about the political control that the minister will have.

Khan said too that the proposal to introduce a 2% turnover tax will fast-track the failure of businesses in Guyana because the tax is predicated on the assumption that there is integrity in the system.

Kowlessar, who had proposed the bill, argued that enforcing collection of the present yearly professional fee of $10,000 was not worth the while of the GRA, a situation which will change with the hiking of the fee to $250,000.

He disputed the contention of members of the opposition that the passage of the Fiscal Enactments (Amendment) Bill was solely for fulfilling the conditionalities of donor agencies such as the World Bank and the International Monetary Fund. The minister said that the bill must be looked at in relation to its objectives, adding that it requires support from everyone.

PNCR MP Lance Carberry said: “we cannot be serious about poverty eradication if the provisions of this bill is the only solution proffered.” He said that the bill intensifies the focus on those already in the tax net and added that an expansion of the tax base is where classes of persons, which did not pay taxes before, now do so. “We hope that the presumptive method will be rule-based and not discretionary,” he said. “Taxpayers must feel that the tax system is equitable and not oppressive.”

In rising to lend his support to the legislation, Nadir made the point that the bill puts into law the policy of rule-based concessions. He said that the 10% service tax was necessary so that rates for these services could be lowered. The minister told the National Assembly that the amendments put forward will ensure that there is redistribution of wealth. Komal Chand of the PPP/C also supported the bill.

Leader of the PNCR Robert Corbin said that although his party supports the noble intentions of the bill, it had concerns that the ills which the bill is supposed to counter may be increased because of the measures laid out in the amendments. “To rush the bill through Parliament just to satisfy the donor communities without considering the implications will be counter-productive.

Corbin also expressed the view that it is the general public which will feel the impact of the new rates and fees.

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 (Potaro/Siparuni), 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.