(Rawle Lucas is a Guyanese-born Certified Public Accountant and Assistant Vice President of the Lending Services Division. )
By Rawle Lucas
Escalation
I have been following in a state of “shock and awe” the discussion about the promise of tax concessions, for investments that do not qualify, to Queens Atlantic Investment Incorporated (QAII). Part of the investment of this company in Guyana hopes to include properties of the now defunct and derelict Sanata Textile Mill. That QAII wants to expand its investments in Guyana should be welcomed and it should be allowed to take advantage of any tax concessions for which it rightly qualifies under the law following a fair and legitimate process of property transfer. Most Guyanese who have been following the published exchanges undoubtedly feel the same.
In my view, the debate has now escalated to a greater level of national concern with the statement attributed to the Ministry of Finance and reported upon in the June 16, 2008 edition of Stabroek News. My attention was drawn, in particular, to a quote of the statement that read “On closer examination, the current Fiscal Enactment (Amendment) Act 2003 does not reflect Government’s intent when the said Bill was laid in Parliament…”. These remarks are unfortunate and appear to harbour insincere motives on the part of the administration given the fix in which it finds itself with the QAII negotiations. Otherwise, it leaves me wondering what other examples, if it is a matter of gross negligence and incompetence, will emerge to embarrass Guyanese further and stifle their economic and financial development before this administration leaves the scene.
I am no lawyer and, as expressed, the quoted statement of the administration leaves me scratching my head as to who had the responsibility of preparing the Bill for submission to Parliament. As I understand it, this task is the responsibility of the current administration, aided in such endeavours by the office of the Attorney General and, in this instance, the Ministry of Finance.
Even if Guyanese might be prepared to overlook the lapse linked to the 2003 Fiscal Enactment Act if it were merely administrative rather than conceptual, other serious concerns that cannot easily be brushed aside flow from the revisionist thoughts now being contemplated by the administration. One concern is the impact that modifying the list of preferential regions could have on the prospects for development of the existing underdeveloped regions cited in the prevailing act. Another concern is the likely impact a revision of the act, as contemplated by the administration, could have on the territorial integrity of Guyana. On this latter point I will comment later.
Further, since the tax concessions aim to attract foreign investment as well, the planned actions of the administration will garner global interest, and it should be aware of that occurrence. The administration needs to send clear signals that assure investors that the environment in Guyana is good for business. Rushing an amendment through to meet a limited objective will not convince foreign investors about the fairness of the Guyana tax regime and of the chance of obtaining equitable treatment themselves in a place with a faulty legal system. Therefore, the administration needs to pay attention to the likely domestic and international consequences of its actions and decisions, and Guyanese should insist that they do.
Act of Faith
It came as a shock to me that it took the administration five long years to stumble on the realization that the law that it was using to extend tax benefits did not even support its own development and investment purposes. It should not have taken an act of faith for the administration to realize its own mistake if it was being attentive to its responsibilities. The failures of the law should have been discovered at least by Go-Invest in the performance of its duties. That agency should have had an idea a long time ago as to how potential investors were reacting, in discussions, to the tax concessions publicized on its web site.
Disclosures Needed
Now, the administration is anxious to amend the Income Tax (In Aid of Industry) Act again without taking the time to properly assess the effectiveness of the existing act and the implications of the likely changes. Even as it tries to move forward with changes, it should tell Guyanese what development and investment objectives the current act fails to meet and in what ways it prevents rapid expansion of domestic and foreign investment in the targeted regions.
Surely, there is a link between tax concessions and anticipated investments and the administration should be interested in knowing how effective the tax concessions are. As data from the Bank of Guyana show, the rate of private investment in Guyana was not significantly better after 2003 than it was before. The administration should want to know the reasons for this and share its findings with Guyanese. They too are investors. Foreign investment was also anemic after 2003 and the administration should be aggressively inquiring as to the reasons for this as well. A review of the performance of the investment sector that was linked to the effectiveness of the existing tax concessions may have helped the administration to realize sooner that the tax laws that it was using were not accomplishing its goals.
Even if this was done, Guyanese could not trust this administration to lead them to economic and financial prosperity. In reviewing the published comments on the QAII deal, the administration has gone ahead and put the cart before the horse as a further demonstration of its inability to do things properly. As it stands, no one knows why the current tax concessions are considered inadequate to meet the planned investments of QAII. The administration would help its case if it told Guyanese which independent agency evaluated the proposed QAII investment and concluded that the tax laws discriminated against it and every other investor and, therefore, were urgently in need of change.
Critical Interests
Nor do Guyanese know why the current tax concessions are considered inadequate to meet the stated investment and development objectives of the country.
What Guyanese do know, however, is the administration will be undermining critical interests of the country by expanding the geographic regions in which investors could enjoy tax concessions. For example, if Region 4 is included in the concession regions, it was likely to attract the lion’s share of the investment because of its well-established infrastructure of roads, electricity supply, ports, and communications, thereby ensuring that the already impoverished regions of Guyana will remain that way. Instead of trying to fit the situation to the policy, the administration should modify the tax concessions, if necessary, after a full understanding and airing of any problems that exist.
Territorial Integrity
Another potential casualty of the contemplated changes to the tax laws is the territorial integrity of Guyana. It is interesting to note that the preferential geographic regions are nearly all located in the Essequibo region. The administration should find out the reasons for that focus of the law if it does not already know. It may want to include in its assessment an evaluation of the costs and benefits of changing the tax laws to meet the interests of a few friends versus meeting the broader concerns of an entire nation. The temptation is always to take the easy way out to reap short-term
benefits either for personal economic or political gain. If it insists on making the changes it contemplates without careful review, the administration could end up doing greater harm than good to the integrity and long-term development of Guyana.
Lack of Concern
I am amazed that only a few in Guyana seem to care about the consequences that the declared intentions of the administration may have on their lives and on their investments. If Guyanese do not insist on having a proper discourse on this and the related issue of QAII, then they too would look foolish, and happily so, in the eyes of the administration. And, once again, no one will be held accountable for another fiscal tragedy.
