The number of self-employed persons filing taxes in 2021 was 27,211 or 24% of the total number of those registered.
While the GRA – in response to the Auditor General’s 2021 report – stated that the database is bloated and in the process of being cleaned up, there is no doubt that a large majority of the self-employed did not file tax returns in 2021 as required by law. This is aside from individuals who operate in the substantial shadow economy and are simply invisible to the GRA. Of those who did file, their average payment was $148,983 which works out to a monthly payment of $12,415 or an average claimed income of around $120,000 per month. Total revenue for the government amounted to $4.054B – a shortfall of $1.5B compared to budget estimates and $500M lower than in 2020 in an economy booming from oil activity.
In contrast PAYE Returns from employed workers were ten times that amount – or $42B. This figure even exceeded corporate tax returns which were $37.5B. Here again only 2,404 companies out of 10,026 filed returns although the GRA noted that the TRIPS Database is also bloated.
Perhaps that is why President Ali took aim at Chairman of the Georgetown Chamber of Com-merce and Industry (GCCI) Timothy Tucker the other day when he called on him to persuade members to comply with the country’s tax laws: “Organisations and associations can’t get away under the umbrella of being an organisation. We have to hold everybody accountable. The government, the private sector, and the businesses – we talk about primitive taxation system but why don’t you Timothy, also address compliance? Because if everybody pays their fair share of taxes then you have greater compliance and then can talk about reduction too.”
Such honesty is refreshing but not expected to have much of an effect. The largest burden will remain upon the workers to keep Guyana running. Minor things ….healthcare, education, the soldiers protecting our borders. It is hard to estimate exactly how many individuals pay taxes in this country but all the numbers point to an already low participation rate with the regularised employees who have no choice but to pay not only feeling they carry the burden but also begrudging those who pay nothing. It is unhealthy and with the advent of oil revenues we are already seeing calls for the relaxation of other taxes with them being seen as an impediment to business.
But taxes are not that at all: They are the very essence of the social compact between citizens and governments and as fundamental as the right to vote. To hand over our money to a government is an act of faith. Perhaps it is why many countries can get along without a functioning democracy, but no democracy can exist for long without adequate taxation. For citizens, rights come with obligations.
Much has been written about the resource bonanza Guyana is now reaping and its effects upon the economy, but it is also interesting to explore its effect upon a country’s politics.
For a useful primer on what might be going on in Guyana, we could do well to turn to a paper by Michael Ross, “The Political Economy of The Resource Curse”. Ross examines both aspects including the assertion that there is a “tendency of a booming resource sector to draw capital and labour away from manufacturing and agricultural sectors raising their production costs” and thereby making their exports less competitive. Many might say this is happening here with current labour shortages and declines in agricultural production. What is remarkable is how this has been actively encouraged by the private sector/government alliance through its shoddily crafted local content legislation even as the President talks about diversifying the economy. It is a paradox and perhaps points to another resource curse theory – that of policy makers with their coffers overflowing succumbing to a myopic euphoria.
This flies in the face of Ross’ observation that “in theory resource wealth should strengthen the state’s leverage over societal actors by giving the state a non tax cushion that can insulate it from interest group pressures and finance payoffs to government opponents. Whey then should a resource boom produce a decline in the quality of state policies? ” On the first point the government may not be there yet in extricating itself from the claws of the business class although the President’s outburst to the GCCI might be a harbinger. Secondly, the past 26 years show that the PPP/C is not very competent at actually running the country. What one sees in 2022 are the same actors but simply with more money and it does not augur well for the far bigger projects that have been concocted.
Ross also refers to cases where governments in dealing with oil companies have to spend a lot of time and resources to “develop specialised tax authorities to tap the huge, concentrated revenue streams such sectors produce and specialised agencies to monitor, regulate and promote the activities of these few critical firms” at the expense of other sectors. ”Since monitoring and regulating these inflexible sectors is complex, the government tends to develop close ties with inflexible firms. These ties force the state to erroneously conflate the narrow short-term interests of the leading sector with the border long-term interest of the nation.”
Does any of this sound familiar?
To come full circle rentier state theory argues that “governments are freed from the need to levy domestic taxes and become less accountable to the societies they govern.” This might explain the persistence of non-democratic regimes in many petro-states from Equatorial Guinea through the Middle East. This is where Guyana is likely heading and why it is imperative the government, instead of relaxing taxation, they look to increase participation by citizens and companies. It is not actually about the money but about preserving the social compact. Taxes are seldom popular on an individual level but act as mechanisms within which we tangibly express a regard for our fellow Guyanese and a sincere form of patriotism.
