Introduction
I trust that there is no ambiguity whatsoever in the minds of readers as regards my opinion of the four traditional or standard goals of taxation, which I introduced in last week’s column (raising revenue; reducing income and wealth inequalities; politically facilitating stakeholder representation in the tax regime; and altering relative prices of goods and services in order to reward-punish economic choices). Putting it as clearly as I can, in my view the traditional goals play obvious and important direct roles in all tax systems, Guyana included. My description of them as one-size-fits-all goals is not intended to be dismissive but only to emphasize that there are other, Guyana-specific goals that have to be considered if tax reform is to be fundamental and comprehensive in its scope. The corollary of this observation therefore, is that, the traditional goals, whilst remaining essential, are inherently limited in their ability to fully address tax reform in Guyana.
Economic Efficiency
The first additional specific goal, which I introduce, is the requirement that, in the context of Guyana’s circumstances, the tax system is made as efficient as possible from an economic standpoint. In economic terms this requires at least the following three conditions: 1) ensuring resources dedicated to tax collection are utilized at their most effective level 2) minimizing resources dedicated to tax avoidance and evasion, as from an economic standpoint such resources are as real as those dedicated to tax collection, and 3) the resources indicated at 1 and 2 are those utilized by the tax authorities; tax payers themselves; and those third parties that are always involved in tax collection (for example, banks; businesses administering PAYE; social security agencies; VAT and excise tax collectors; legal and enforcement agencies; and so on).
Some tax analysts argue that this goal should be routinely added to the four traditional goals that I have already cited. They classify it as one element of a necessary managerial triad to accompany all tax reform namely: political will; administrability; and, sound implementation. The maxim they put forward is: “a tax system is
