Dear Editor,
It is quite interesting to observe the discussions on the Income Tax (In Aid of Industry) Act as it relates to the concessions accrued to industries that seek to establish and develop themselves in Guyana. Of more interest was Christopher Ram’s discourse in the Sunday Stabroek Business Page dated June 8th 2008.
The Fiscal Enactment (Amendment) Act No 15 of 2003 identifies two areas in which the Minister may grant tax concessions and waivers. The Amendment did state that the Minister may act in accordance with the clauses distinctly specified in the laws. Accordingly, section 21 (1) states that the Minister may grant an exemption from Corporate Tax with respect to income from economic activity where (a) the activity demonstrably creates new employment in regions 1, 8, 9 and 10 and (b) the activity is a new economic activity in non-traditional agro processing, ICT, petroleum exploration, extraction or refining, mineral exploration, extraction or refining and tourist hotels or eco-tourists.”
In the previous Amendment of 1998 for the Income Tax (In Aid of Industry) Act No 18, the Minister was conferred with the power to grant tax holidays under this rationale, “where, in the opinion of the Minister, the trade or business carried on by a company … is wholly of a developmental and risk-bearing nature and is likely to be instrumental to the development of the resources of, and beneficial to Guyana, the Minister may issue a direction to that effect and thereupon the income of such company shall be exempt from taxation for a period not exceeding 10 years of assessment as the Minister may determine (herein called the tax holiday period).”
I tend to agree with the Amendment of 1998 because it captures essentially, what business enterprises are and the seriousness of the challenges they face and states why they should be conferred with various concessions. The operative words for businesses are “developmental” and “risk-bearing”.
I urge Mr. Ram, representatives of the Private Sector Commission and the various media writers to enlighten the Guyanese public on the magnitude and types of large scale investments made within the last 10 years in Guyana by local businessmen. I am looking for statistics that would prove to me that the nature of the investments have been one of a kind, highly industrialised and have moved beyond agriculture, retailing and distribution and small scale manufacturing. I would also urge the aforementioned to identify for me the companies that have reinvested in Guyana in huge proportion.
One would not disagree that the Fiscal Enactment (Amendment) Act 2003 is limited; neither is it absolute.
A true and astute businessman would understand the undertakings of the deal for the Sanata Textiles Complex. This was made known when government representatives indicated that in order to carry out any other investment at the complex, an investor must undertake to resuscitate the textiles operations.
That is quite a challenge I must say as no one wanted to do that since such an operation required massive capital investment and was in an unchartered territory. I guess no one was brave or risk-loving enough to accept the challenge except QAII who so accepted, in order to execute its other business objectives. From the media I was able to determine the various businesses that QAII intends to open at the Complex. My analysis of it shows that there is vertical integration in all of them except for the textiles operation. But yet the investor showed the stamina in accepting the challenge. I think we must not be too quick to deduce any sophistry here as the investor took up what everyone refused to accept. It is only fitting that the investor be granted concessions for undertaking and gambling with millions of dollars in investment.
Messrs. Ram and others need to question what was the opportunity cost to the Sanata Complex (the next alternative) had QAII not leased the property. The answer is further ruin and increased maintenance cost for a property with potentials but unable to generate revenue.
This is bearing in mind that the property was abandoned for 15 years with no takers. Therefore, would it not be better to get something from it instead of nothing at all?
Additionally, it is only section 2 of the Income Tax (In Aid of Industry) Act that has been substituted by section 21 of the Fiscal Enactment (Amendment) Act. Having perused the Income Tax legislation I came across another clause.
Mr. Ram quoted: “(1B) No remission, concession, or waiver of tax by order or to other subsidiary legislation is valid unless the Act under which the subsidiary legislation is made expressly permits the Minister to provide such a remission, concession or waiver.” (Fiscal Enactment Act)
However, the latter part of section 2 (7) of the Income Tax Act states that: “Provided that the Minister from time to time, by order, may vary the said Schedule by adding thereto any other trade or business with such qualifications and exceptions as he may think fit.” This clause is referring to the legislation of section 2 (whether amended or not) and the list of applications specified in the First Schedule. I have not come across anything that indicates that this clause was repealed like section 2 (1) as stated in the Fiscal Amendment Act. I am fully aware of the limitations of the Minister to grant waivers and to abide by what is expressly stated in the Act but would not such amendment conflict therefore, with the above stated clause?
If this clause, which now adds another twist to the controversy, still exists then the Minister can indeed, even with the limitations specified, grant concession, as he sees fit. By virtue of this, QAII should not be contending that it should be conferred with concessions for its textiles and antibiotic plant and R&D facility, but rather it would have qualified for them by law. Additionally, the said Act makes provision for allowances to be granted to trade of a scientific research nature. This would mean that QAII’s R&D is qualified for concessions as a result of this.
The First Schedule of the Income Tax Act also indicates that allowances would be conferred to companies (for various reasons specified in the same Act) for a number of trades. Allowances are applicable to trades of the manufacturing sector inclusive of textiles and drugs.
Yours faithfully,
(Name and address supplied)
