Government agencies must be able to determine the level of revenue being received from foreign companies operating in Guyana and must be wary of the issue of transfer pricing and its potential to negatively impact financial returns to the country.
This is the view of Chartered Accountant and Attorney at Law Christopher Ram.
“Both the Guyana Geology and Mines Commission (GGMC) and the Guyana Revenue Authority (GRA) should be alert to this,” Ram said. “You have different ways of transfer pricing – a method used by transnational companies to shift revenues from highly taxed countries to low or no tax countries, hence the attraction and use of tax havens.”
He said transfer pricing could take the form of overcharging for inputs to undercharging of revenues. “It could also take the form of artificial or fictitious payments such as royalties and management charges not determined by arm’s length market forces,” he said.
He said that Guyana’s laws have contemplated some of the issues but capacity of the staff of the local agencies is another question altogether. “Our tax laws include mechanisms to deal with all of those issues but the tax authorities usually would be required to have the capabilities to match the resources and resourcefulness of transnational companies,” he said.
“I would be one of the first to admit that the accounting profession does its fair bit in advising on some aggressive and creative strategies to arrange taxes to the lowest possible level,” he said.
However, Commission-er General of the GRA Khurshid Sattaur said that his agency is equipped to detect methods of transfer pricing and efforts to cheat the system of the right taxes owed.
The Commissioner General said that following post case audits last year, the body was able to recoup some $1 billion extra in taxes owed by companies and businesses.
“You have business that do buying and selling and others that buy raw material to manufacture and then sell a finished product,” he said. “A company may buy from its parent company in America and then manipulate the price,” he said. “But it wouldn’t serve their interest if both jurisdictions have systems for determining the market and prices,” said Sattaur.
He hailed the United States as one jurisdiction that is competent and highly sophisticated and therefore is it difficult to cheat the system. “Since mark ups determine your profits, we know what you are doing in terms of Customs payments and what you are doing in terms of VAT so we have a grasp of the income taxes you should be paying. We capture your purchases with Customs, and we capture your sales with VAT,” he said.
Sattaur said that the TRIPS system is designed to address such concerns and has come in useful for this and other reasons.
“We have been auditing a lot of companies based on knowledge that we have of what they are doing and what they should be paying,” he said. He stressed that in 2012 the GRA was able to net $1 billion on top of what it brought in the year before. He said that the GRA can now do post case audits to capture what companies and businesses should be paying to the Treasury.
Efforts to make contact with Commissioner of the Guyana Geology and Mines Commission Rickford Vieira proved futile.
