Scope and power of government
In the study of public finance, students come across several concepts which expose them to the scope and power of the government. For one, students learn about societies and their operation to appreciate the context in which government plays a role. They realize that society is made up of different groups such as family, professional associations, non-profit organizations, religious groups, private companies, political entities and the state. They also learn that the state is the most powerful of those groups. Some societies, often described as organic societies, see executive government as the heart of the society. Government assumes a role that is greater than that of its people with the implication that it could act as it wishes and those actions should not be questioned. Respect for the rule of law is often biased and corruption is endemic where government expenditure represents a high level of gross domestic product (GDP). This large economic input into the economy is often accompanied by the use of state resources to scuttle criticism, squash competition, and disseminate propaganda through controlled media. Under those circumstances, the taxing and spending activities of government tend to serve more of a political rather than an economic welfare purpose.
At the other extreme is the mechanistic society wherein the individual, and not the government, assumes greater importance. While government is seen as being able to do good things, that role is often thought to be most useful in the provision of public goods and services which private markets cannot produce efficiently. National defence, public safety and protection, judicial services, public education, public health and care of public parks are typical activities that are regarded as acceptable roles of government. Periodically, the state is urged to distribute or redistribute resources in order to meet some welfare economic purpose. The provision of subsidies to producers or the reduction of taxes helps to expand economic activity and create jobs and enable more people to participate in the economy. The allocation of resources to vulnerable groups also addresses the adverse effects of natural disasters, issues of disabilities and poverty and helps some people to meet their basic needs. Under those circumstances, the taxing and spending activities of the government are presumed to be only possible with the consent of the people.
The contrast above suggests that the mechanistic society is more democratic while the organic society is more totalitarian in nature. However, in both types of societies, the power of the government could be on display, but less so in the mechanistic society because of the restraining role of individuals and interest groups. The power of government stems from two things, sovereignty and the law.
Sovereignty
Sovereignty refers to the supreme power of the state that is exercised within its geographic boundaries and without external interference. The state has power and authority over the people of the country unlike other groups which could only hold their members accountable. Where power corrupts, the state often exercises absolute authority and dismisses opposition demands with contempt, and ignores the will of the people without justification. Those practices are associated with the organic society where government thinks that it is the be all and end all of society. Decisions of the state apply to the entire country and not just some parts of it. Unless there is divine intervention, the state remains forever and the geography and culture that define the state are usually accepted by the whole world. A foreigner or a foreign company in Guyana becomes subject to the control and direction of the state and the rights that it confers on them are equal to those of citizens and indigenous companies.
The law
The other thing that enables the state to distinguish itself from the other groups in the society is the law. All groups develop laws to help them run their affairs and govern the relationship between their members and that with outsiders. The application of those laws however is restricted to the members of the group. So, if someone is not a member of a group or has no dealings with the group, the law of that group is of little or no consequence to him or her. However, when the state makes laws they apply to everyone. The laws of the state are ineluctable and ignorance of them is no excuse or defence. They apply to those who rule the state and those under the rule of the state and no one without immunity ought to be able to escape them.
Powers of compulsion
Backed by the supremacy of the laws and armed with the authority to enforce them, some agencies of the state wield extraordinary powers and can reveal the dictatorial tendency of government. Such gargantuan powers are more ominous and politically threatening when the immunity of an intolerant or obdurate President is inserted into the process of tax law. One agency with such powers in Guyana is the Guyana Revenue Authority (GRA) whose most potent weapon is its powers of compulsion. The GRA has responsibility for the tax laws of Guyana with the goal of collecting taxes for use by government. Guyanese generally tangle with the Income Tax Act and the Customs Act. Most other tax laws are obscure unless one is getting involved in any of the set of businesses governed by those laws. The Commissioner-General cannot do his job of assessing tax or determining tax liability without the requisite information. The law gives him the authority to demand that information from taxpayers if it is not provided voluntarily. Several provisions of the Consolidated Tax Act 2008 from Article 60 through 64 put the Commissioner-General’s powers on full display, including the ability to make taxpayers do things that might even turn out to be unnecessary.
One example of this frightening reality is seen in Article 60 paragraph 2 which states “The Commissioner-General may by notice in writing require any person to furnish him within a specified time any particulars in writing he requires for any purpose relating to the administration or enforcement of this Act, whether or not the person has been previously assessed or additionally assessed, with respect to the income, assets and liabilities of such person or of his wife”. It would appear therefore that it does not matter how often the GRA has assessed a taxpayer, it can keep coming after that taxpayer. Even if such behaviour amounts to harassment, it looks as if it could continue for as long as the GRA wishes it to.
The grim reality is that things could become rougher if the taxpayer appears to be resisting the request of the Commissioner-General. According to Article 64, “The Commissioner-General or any officer duly authorized in writing in that behalf by him may enter any premises used for industrial, business or trade purposes at all reasonable times for the purpose of obtaining any information required for the application of this Act”. The Act further states that “Any person who refuses to permit the Commissioner-General or such an officer after production of his authority, to enter any such premises or obstructs the Commissioner-General or such an officer in the discharge of his functions under the preceding subsection shall be liable on summary conviction to a fine of fifteen thousand dollars or to imprisonment for six months”. The fine of $15,000 does not amount to much, but the likelihood of imprisonment from resisting a request to cooperate with the Commissioner-General is not a pleasant thought.
Turn up the heat
In other words, the GRA can turn up the heat and invade the premises of any taxpayer to get the information that it wants and force compliance. No matter how one resists and protests, the GRA can act aggressively and apologize afterwards if it needs to and so wishes. This means that the Commissioner-General does not need the authority of any one to go after the tax information of any taxpayer and to launch an investigation into the business dealings of any person or enterprise. That authority is already contained in the law that created his position and the authority that goes with it.
Some Customs officials have the exact authority of the police and the GRA could enforce compliance if the matter involves the Customs Act. That is a very powerful level of authority which is backed up by the threat of imprisonment and even re-striction of freedom to travel.
Consequently, until an appeals process decides otherwise, the GRA can make a taxpayer do needless things and keep such person’s life in suspense.
The powers of the GRA were not intended to torment taxpayers, and if used vindictively will not produce welfare benefits or economic efficiency. The risk of this type of behaviour and loss of economic benefits heighten when a government feels that it has a right to remain in power indefinitely. Members of a government begin to see state resources as their own and not those of the people. State institutions are not used efficiently and become tools of entrenchment and repression rather than agents of economic change as public officials seek to remain in control of the state’s resources.
In such circumstances fiduciary responsibilities like upholding the secrecy obligations could recede into the background.
The GRA ought not to be a tool for revenge or maladministration by the state. Some lawmakers might only now be awakening to the reality that by endowing the GRA with extreme powers, they might be enabling the maladministration of the executive.
Unnecessary strain
But maladministration has economic consequences. It leads neither to increased competition nor expanded economic benefits. The victimized taxpayer incurs additional costs of lost time and legal fees addressing tax matters. For anyone caught up in any case of GRA maladministration, these are costs which cannot be capitalized and must be absorbed immediately.
The short-run effect is to reduce net income and cash flow and put a family or business under unnecessary financial strain. The goal of economic competition becomes secondary and public policy makes no effort to increase such competition. Except in the distribution and transport industries, the economic structure of Guyana is dominated by some form of private or state monopoly. Information is vital to the better functioning of markets and to breaking monopolies.
Information that could increase competition and make markets work better is not readily available to the public.
Unpleasant reality
Reduced access to information is one consequence of an attack on the media by the state since restricting information through the media only serves to strengthen the monopoly position of government and private businesses. Action by the state which restricts access to information through the media ends up reducing the benefits of public finance to all Guyanese.
When the state continually takes a position in opposition to the majority of its own people, neither sovereignty nor the law could prevent the diminution of its utility and acceptability in their eyes. Students of public finance also become aware of this unpleasant reality of the state.
