Houses passes bill for provisional licensing of small businesses

Winston Jordan

With more than half of all local businesses operating without licences, Finance Min-ister Winston Jordan has said that the amendment to the tax law that was passed on Wednesday will allow for provisional licensing of small business owners, which is expected to bring them in the tax net. 

The Tax (Amend-ment) Bill 2018, which was piloted by Jordan, will amend Section 71 of the Tax Act to include a provision for the issuance of a provisional licence for business premises, in cases where it can be shown that the application for the licence is in process and all efforts are being made to satisfy the needed requirements.

It will also add an additional subsection to Section 71, which its explanatory memorandum says is intended to allow the Guyana Revenue Authority (GRA) to help small businesses to start operations, pending the grant of such permits as building and fire permits. The proposed subsection states that notwithstanding anything to the contrary provided in the Act, the Commissioner-General of the GRA may issue to a person who has applied to the commissioner for a licence, “a provisional licence for a period of not more than two years, and for a fee of fifty percent of the respective annual licence fee where it can be shown that the application for the licence is in process and all efforts are being made to satisfy requirements therefor.”

Jordan told the House during the debate of the bill that micro and small enterprises (MSEs) are critical drivers of long-term economic growth, especially in developing countries, such as Guyana.

“We can agree therefore that MSEs are the best generators of innovation and competition to lay strong economic growth. Many small businesses and entrepreneurs can make up a large part of the informal economy. This is a major challenge in many developing countries and Guyana is no exception,” he said, while noting that although small businesses are not necessarily the biggest tax evaders, any unreported business activity at any level is undesirable and stymies business growth and development by distorting competition.

He noted that in addition to inappropriate regulations and burdensome administrative procedures, there are many reasons why small businesses remain outside of the formal economy and, therefore, the bill is useful to examine these issues, with a view of providing a more enabling business environment for those who feel “shutout of the formal economy.”

He explained that the amendment is an important step in the right direction and is a signal that the government understands the many challenges that are faced by MSEs.

“The introduction of this bill emanates from the fact that even though there are over 18,600 businesses countrywide, only about 7,500 are licensed with many of those being unlicensed due to no fault of theirs. For businesses to be licensed, they need various permits from various agencies, including approved business plans from the Ministry of Housing, safety certificates from the Guyana Fire Service and sanitary certificates from the Mayor and City Council,” he said.

Jordan added that the bill will allow for businesses to be registered and have a provisional license rather than operating illegally outside of the tax net. The provisional licences will cost 50% of the permanent licence and will allow owners of MSEs to have more time to apply for the various permits. The provisional licence cannot be used to acquire an additional licence and upon expiration no extension will be granted.

The amendment will target grocery shops, variety stores, and snackettes, among other businesses.

In addition to Jordan, Minister within the Ministry of Finance Jaipaul Sharma and Opposition Members of Parliament Juan Edghill and Irfaan Ali also made presentations on the bill.

Edghill noted that while the opposition supports the bill in principle, there should be a clear policy guide that will help the small businesses grow and develop. He stressed that the MSEs should be linked to a system where they are coached to ensure that they grow properly since the provisional licensing period of two years will be running concurrently with small business’ most vulnerable years. He said he is advocating for there to be a nurturing of the MSEs to ensure that they develop properly.

Ali also highlighted that there is a need for systems to be addressed for there to be an enabling environment for MSEs.

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