Dear Editor,
Recently there has been an increase in prosecutions by the Guyana Revenue Authority (GRA) against registrants under the VAT Act, who for various reasons, have failed to file VAT returns as required by law. This year alone, I have had to appear for a number of clients in more than one magisterial district.
The GRA therefore must be alarmed that it has had to resort to prosecution to have VAT registrants comply with Section 31 (1) of the Value Added Tax Act No 10 of 2005, and must do some soul-searching to determine whether or not their educational programme is effective and serving the purpose of continuously educating VAT registrants of the requirement under the voluminous Value Added Tax Act.
Section 31 (1) of the act states that every taxable person “is required to lodge a Tax Return for each Tax period with the Commissioner within 15 days after the end of the period whether Tax is payable or not within that period.”
If a survey were to be done by the GRA or any independent organization in Guyana, I am confident that the majority of VAT registrants, particularly small businesses, would reveal that they are not very conversant with the requirements of this section of the act. In simple language what this section states is that even if you have a zero return, you must lodge a tax return in a form prescribed by the Commissioner, under Section 31 (2) (A)
All the persons I have represented in court have told me the same story: that they did not know that they still had to file a return, even though they had no business for the period under prosecution, and in some cases their return would have been zero.
The VAT legislation which is still a new creature in its infancy, is still a puzzle to the majority of persons within the VAT net, and unless a business has the institutional infrastructure and capacity to studiously engage in monitoring the requirements of the Value Added Tax of 2005, somewhere along the line they will fall afoul of the law.
What is equally disturbing is the way the Magistrates’ Court in Guyana interprets Section 72 (1) of the VAT Act which states, “A person who knowingly or recklessly failed to lodge a return as required by Section 31, commits an offence and is liable on conviction to a fine not exceeding $15,000.”
What is happening in the magistrates courts is that fines ranging from $5,000 to $15,000 are being meted out against taxpayers, regardless of the set of circumstances in which a VAT registrant finds himself, and that may have caused him to fail to file a return. To quote one Magistrate, “Ignorance of the law is no excuse.”
The complaint made out by the GRA, and the statement of offence, states that the defendants “knowingly and recklessly fail to lodge a return.” For the GRA, the complainant, to succeed, it must prove that the defendant “knowingly fails” to submit a return. That is, he knew he had to file a return even if was a zero return, that he was reminded to do so, and after being reminded, he continued to refuse or ignore to file one. Secondly, having gained such knowledge, he “recklessly” disregarded the requirement to do so.
Caught between a rock and a hard place all persons have chosen to plead guilty, throwing themselves on the mercy of the court, rather than fight the GRA.
The Magistrate then applies Section 72 (1) of the act which states, “A person who knowingly or recklessly failed to lodge a return as required by Section 31, commits an offence and is liable on conviction to a fine not exceeding $15,000.00 per offence.” There is no provision for custodial sentence under Section 72 (1). I was involved in the discussion, select committee review, debate and meetings throughout the period that the VAT legislation was first tabled in parliament, and if Hansard were to be examined, anyone ccould find a host of protests against the power to be vested in the GRA under Part XIV – Offences and Penalties, as it was feared that this section of the act could be used and interpreted arbitrarily by GRA staff and the magistracy.
The records of the debate would also reveal that assurances were given that Section 72 (1) is intended to provide for nominal fines as well as severe fines ranging from $1 – $15,000.00. Normal fines would be imposed on first-time offenders and the greater sum on habitual repeat offenders. Nominal for at least one Magistrate means $10,000.00 per offence of failing to file, and a reasonable excuse was evident even where there was nothing to report.
Of graver concern is the wanton disregard for provisions under Division II – Civil Penalties, in particular, Section 79 (A), which states that, “In so far as circumstances permit the provisions of this Division should first be utilized before resort is had to the provisions of Division I” – that is, criminal prosecution.
Section 82(1) provides for a civil penalty for failure to file a VAT return, with the fine being $1,000 per day for each day or part thereof that the return remains outstanding, or an amount equal to 10% of the tax payable for the period of such returns, for each month or part thereof that the return remains outstanding.
Most interestingly Section 82(2) states that the penalty imposed under subsection (1) shall not exceed the amount of tax payable in respect of the return. So if there is no tax payable, that is a zero return, under the civil rules, the taxpayer pays zero as penalty.
And despite the requirements that the provision of a civil remedy be first utilized, the GRA jumps to invoke the criminal jurisdiction for redress.This letter is therefore an appeal to the Commissioner General to remind his legal department to read and understand the act before jumping headfirst to prosecute, and to the Chancellor of the Judiciary to educate his magistrates, some of whom either do not seem to know or understand, or else carelessly interpret the provisions of the VAT Act, to the detriment of citizens.
To put it bluntly if the magistrates do not understand the act, how can a small businessman with less than a grade 12 education be expected to do so.
Yours faithfully,
Jerome Khan
