The National Assembly last Friday passed an amendment that will see the Guyana Revenue Authority (GRA) applying an 18% interest rate on tax arrears.
The amendment of the Financial Administration and Audit Act Chapter 73:01, once enacted, would see the repeal of two sections: Section 6B (2), which states: “the Commissioner General shall specify quarterly by public notice the rate of interest applicable to tax arrears using the average market rate of interests for the preceding quarter;” and Section 6B (3), which states: “for the purpose of this section market rate of interest means the prime lending rate as published by the Bank of Guyana plus 500 basis points.”
The amended Act would allow for the rate of interest applicable to late payments referred to in Section 6B (1) to be fixed at 18% simple interest per annum.
Minister of Finance Winston Jordan, who piloted the bill, explained that the rationale for amending the law came in the light of difficulties faced by GRA staff in arriving at the correct applicable interest and payment thereafter derived due to “complex and problematic computations.”
“The numerous complex computations required because of the constantly changing interest rates have given rise to, in many cases, incorrect results for some tax types when using the GRA TRIPS [Total Revenue Integrated Processing System],” Jordan said as he noted that it poses even more difficulty when manual preparation and calculation are proposed, hence the urgent need to simplify the tax rate.
He added that the “simple act of moving to a simplified unitary interest rate” will have a number of benefits, including more accuracy in the calculation of interest on arrears, easier computation, easy administration of late payments, more compliance, and more revenue from interest.
On the other hand, opposition Member of Parliament (MP) Irfaan Ali contended that the decision to repeal the sections suggests a lack of confidence in the Bank of Guyana.
“The amendment has implications on the economy and how the Central Bank is viewed,” Ali said, before asking the minister to justify the rate being set and to ultimately reconsider having the GRA setting the rate.
In response to Ali’s concerns, Jordan explained that the rate of 18% was set following the examination of trends in the development of the Bank of Guyana’s rates, dating back to 2004, which could be higher than the fixed rate now set. “The amendment does not mean a lack of confidence in the Central Bank; rather, in reality, what we’re suggesting is that since that rate moves ever so often…we are shortening and simplifying things by utilising a flat rate,” he said.
Meanwhile, opposition MP Anil Nandlall, in contesting the bill, questioned the existence of Financial Administration and Audit Act as being a part of the Laws of Guyana, citing the Law Revision Order of 2012, which he contended has the Audit Act listed under Chapter 73:01.
“We are seeking to amend a law that does not seem to exist…I don’t know how we are going to amend a principal law that does not exist,” Nandlall posited.
Nonetheless, Jordan explained that the volumes cited by the opposition MP were longer in use.
“It is this volume that corrupted the laws of the country at great expense. Section 6B, which is still in existence by virtue of Act No 14 of 2004, is what we are seeking to amend today,” he added.