Introduction

Taxation without representation was one of the causes of the American Revolution and has ever since been an emotive appeal for those who consider themselves aggrieved by injustice. In a more peaceful environment the call is for a social compact – one of mutually enforceable interlocking rights and responsibilities, often between the State and the citizen. Where a breach occurs sanctions step in – penalties, including jail time for the tax cheat and for the Government, sanction through the ballot box. But the Government itself does not administer the tax laws or collects the taxes – it uses the tax authority as its alter ego or its agent. In the course of one’s life, one interacts with the tax authority more than any other arm of the Government. That Ram & McRae believes strongly that there needs to be a binding compact between the tax authority and the taxpayer is neither revolutionary nor new.

We sensed from the Minister’s Budget Speech a recognition of the need for a less combative, less adversarial relationship between the government and the governed. We believe that the mood is right for the establishment of a strong, enforceable charter between the taxpayer and the Guyana Revenue Authority. While we recognise that the incidence of tax evasion is extremely high, the traditional attitude of the tax administrator towards taxpayers who are often meeting or trying to meet their obligations leaves a lot to be desired.

Most taxpayers who have had dealings with the GRA usually come away from those encounters feeling, justifiably or not, that they did not get a fair shake. These viewpoints generally arise from the belief that no matter what evidence is produced or what is said, the attitude of the GRA is one of distrust and display of power. As a long established firm of accountants, Ram & McRae has an entirely different relationship and experience with the tax authorities but whether justified or not, this is and remains the perception of the average person who has had to deal with a tax issue.

Feeling of Helplessness

This sentiment is in no way unique to the Guyanese taxpayer and it is safe to say that taxpayers the world over are equally unhappy with the way they are treated by their own tax authorities. In the United States of America, the feeling of helplessness is as bad if not worse because budget cuts have resulted in less attention to customer service and more emphasis by the Internal Revenue Service (IRS) on enforcement. Speaking with a live person at the IRS in the USA is almost impossible unless one is prepared to wait sometimes as long as two hours, after and if you have been able to decode the various prompt options offered by the sophisticated telephone system. Then even after all that time and frustration it is not unusual to hear: “Due to excessive call volume, we are unable to answer your call. Please try your call again later,” followed by the click of the system disconnecting the call.

There is however an alternative which is available and which has its beginnings in the Office of the Taxpayer Ombudsman which was created in 1979 by the IRS “to serve as primary advocate within the IRS for taxpayers”.

Significant Change

The position of Ombudsman was codified in the Taxpayer Bill of Rights in 1988 but it was felt that this was not enough and The Joint Committee on Taxation, a Congressional body, decided that a significant change was necessary. The Committee set forth the following reasons for change: “To date, the Taxpayer Ombudsman has been a career civil servant selected by and serving at the pleasure of the IRS Commissioner. Some may perceive that the Taxpayer Ombudsman is not an independent advocate for taxpayers. In addition, in order to ensure that the Congress is systematically made aware of recurring and unresolved problems and difficulties taxpayers encounter in dealing with the IRS, the Taxpayer Ombudsman should have the authority and responsibility to make independent reports to the Congress in order to advise the tax-writing committees of those areas.”

Voice of the Taxpayer

Congress then replaced the Office of the Taxpayer Ombudsman with the Office of the Taxpayer Advocate in 1996 and the Taxpayer Bill of Rights 2 described its functions as:

  • To assist taxpayers in resolving problems with the IRS;
  • To identify areas in which taxpayers have problems in dealings with the IRS;
  • To the extent possible, propose changes in administrative practices of the IRS to mitigate those identified problems; and
  • To identify potential legislative changes that may help mitigate such problems.

In 1997, the National Commission on Restructuring the Internal Revenue Service identified the Taxpayer Advocate as the “voice of the taxpayer” and stated that the Taxpayer Advocate should be viewed as independent within the IRS. It also noted the Taxpayer Advocate’s important and essential role in the protection of taxpayer rights and in the promotion of taxpayer confidence in the integrity and the accountability of the IRS.

Since assuming her position in 2001, National Taxpayer Advocate Nina E. Olson has emphasised the protection of taxpayer rights in tax administration. In her 2007 Annual Report to Congress and in later reports, she proposed a new Taxpayer Bill of Rights. On June 10, 2014, the IRS formally adopted the National Taxpayer Advocate’s proposal, to renew the focus on protecting the rights of taxpayers in all of their dealings with the IRS. This document groups the dozens of existing rights in the Internal Revenue Code into ten fundamental rights, and makes these rights clear, understandable, and accessible for taxpayers and IRS employees alike:

  1. The Right to Be Informed
  2. The Right to Quality Service
  3. The Right to Pay No More than the Correct Amount of Tax
  4. The Right to Challenge the IRS’s Position and Be Heard and
  5. The Right to Appeal a Decision in an Independent Forum
  6. The Right to Finality.
  7. The Right to Privacy
  8. The Right to Confidentiality
  9. The Right to Retain Representation
  10. The Right to a Fair and Just Tax System

Because the relationship is of mutual rights and responsibilities, the Advocate also proposed that it should not be a one-sided transaction but that taxpayers should also accept the following as their responsibilities:

  • Obligation to be honest;
  • Obligation to be cooperative;
  • Obligation to provide accurate information and documents on time;
  • Obligation to keep records; and
  • Obligation to pay taxes on time.
  • Customer Service

The Taxpayer Advocate in the USA has proven to be very accessible and moves relatively quickly to bring a resolution to complaints received about the IRS. The one drawback is that most taxpayers are not aware of that resource. Adopting something similar in Guyana would be an extremely radical but what may seem a rational and yet progressive initiative could go a far way to improving the perception of the GRA. Most of the ten rights identified above are already enshrined somewhere in our legislation but whether sufficient attention is paid to upholding them is debatable.

Focus believes that there are many well-intentioned, hardworking persons in the GRA who try their best to meet the needs of taxpayers but that they face many constraints in executing their daily tasks. The GRA is the main revenue generator for the government so it will always be under pressure to meet the financial targets imposed by the Government. Its leadership is therefore perpetually treading a fine line between the enforcement and collection and its recognition that it is a public body, that its acts are subject to judicial review, and that it has an obligation to be fair and just to its major stakeholder – the taxpayer. Are taxpayers really even perceived as stakeholders rather than adversaries out to outwit the tax administrator and to cheat the system?

It would not be inaccurate to conclude also that the prevalence of tax evasion inevitably informs an attitude of suspicion on the part of the tax administrator. The consequence is however that their actions disproportionately impact those taxpayers who are trying to be compliant since many lawbreakers in fact have little or no interaction with the GRA.

Inequality and statutory abuse of Taxpayer Rights

The relationship is one of unequal power with the obligations on one side (the taxpayer) and power on the other (the tax authority). It is all well and good to say that the “do nothing, fear nothing”. But the taxpayer has neither the power nor the means to take on the tax authority. Fortunately, there is the Judicial Review Act but only the few and the privileged have the means and the will to take on the authority. There is a fear of causing a backlash and dealing with the consequence of challenging the authority and possibly being l targeted. The authority can take its own time to raise an assessment and additional assessment, placing on the taxpayer the burden of proof. The tax authority can take its sweet time to respond to correspondence and pleas from the taxpayer but the latter is almost always constrained by a fourteen or twenty-one days deadline.

If you owe the tax authority, there is a legal penalty and there is statutory interest. If the tax authority owes you, it will first check into your past to dredge up any reason or cause why you should not be paid. And if after an audit and whatever other obstacles are available to the authority, it finds that it does owe you, you are then placed in the queue subject to availability of funds. And if the taxpayer is finally paid, often years and years after, the interest s/he receives, if any, is disproportionate to what is payable on amounts owed to the authority.

Ram & McRae welcomes the Minister’s announcement modifying the deposit requirement to exercise the right to appeal against any unreasonable act by the tax authorities. It reverses a draconian rule upheld by the Guyana courts in less enlightened times. Kudos to Minister Jordan and Commissioner General Statia. But it will not be enough if there is real injustice.

Conclusion

There is no doubt that the relationship between the tax authorities and the taxpayer is improving, albeit slowly. The GRA needs to ensure that it is not seen as a coercive arm of the state but in an independent partnership or compact with the taxpayer. It needs to disengage – at least publicly – from its perceived close relationship with the political directorate. Any communication between it and the politicians should be done through the Chairman of the Governing Board. Its leadership needs to concentrate on and not compromise its role, responsibilities and relationships. Ram & McRae had argued during the previous Administration against the GRA being part of the anti-money laundering authority. That sends a bad signal. Worse is the possibility that it will share its powers and functions with the State Assets Recovery Agency.

Let us have that Taxpayers’ Charter or Bill of Rights. It is long overdue.  A clear outline of rights would also be highly beneficial to the GRA and taxpayers as a means of outlining clearly the expectations for the functioning of the entity. It is time for a peaceful revolution.