Tax-free bonus payments for bauxite workers have failed to take account of the Income Tax Act

Dear Editor,

The Stabroek News of December 3, reports “elation” on the part of labour and “happiness” on that of the political directorate at the decision by the Cabinet to restore payments for overtime to bauxite workers as tax free. Mr Lincoln Lewis, President of the Guyana Bauxite and General Workers Union and General Secretary of the TUC is quoted as stating that the tax free arrangement dates back to 1988 and was taken away in 2007, under the presidency of Bharrat Jagdeo.

That is correct, but this fails to take account of the law relating to such concessions or the changes in relevant circumstances. Sub-section (y) of section 13 of the Income Tax Act provides for the exemption from income tax of “any emoluments payable under any incentive scheme approved by the Minister”. Generous as it is, this provision is limited in that it applies only to incentive schemes approved by the Minister of Finance. The notion that Cabinet can usurp a statutory power granted by the legislature to a minister is extremely disturbing, both on principle and in practice.

For the tax free concession to apply, an incentive scheme agreed between management and the workers must be submitted to the Minister who must be satisfied that the scheme is genuine and not simply a means of augmenting the take home pay of workers. Such a scheme must contain measurable targets and cannot apply to some general category of income or hours worked.

The restored concession to which Mr Lewis refers was made in an announcement by President Hoyte to bauxite workers in a state-owned entity. When that ownership arrangement changed, the Hoyte scheme came to an end. The automatic transfer of the concession from a state-owned entity to Rusal and Bosai is unlawful and constitutes subsidies to those companies to the extent that their labour cost is borne partly by the state.

While workers and their representatives may find it easier to extract concessions from the state than from employers, politicians must recognise the implications for the entire tax system which is rendered both discretionary and discriminatory. Workers across industries ought to be paid more and any campaign by the labour movement for increased pay would win widespread support. The question then is why the workers in Rusal and Bosai are identified for a concession that is not available to the workers on Guyoil, GPL and the city council. Is one group more important than another?

When I was responsible for ‘Business Page’ in the Sunday Stabroek, I wrote critically on more than one occasion about the exemption from income tax of overtime worked in the sugar industry, as distinct from the Annual Production Incentive. The proper and legal way to right that illegality is to discontinue it, not to resume it in the bauxite sector.

Successive governments have made it difficult for themselves by offering tax free bonuses to sections of their workforce. That too is wrong and unlawful unless the payment falls within the income tax laws. It will cost the government not a penny more by grossing up the payment and deducting the tax thereon and paying the tax to itself through the GRA.

 

Yours faithfully,

Christopher Ram

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