This is the third article in a four-part series on the above subject. So far, we have looked at public financial management in the pre- and post-1992 periods and noted a number of reform initiatives in the latter period. However, we felt that those initiatives were not voluntary acts on our part but rather conditionalities imposed by international financial institutions for the grant of debt relief. Once we became the beneficiaries of the generosity of the IFIs and friendly countries, we turned our backs at these initiatives. As a result, most the initiatives were not followed through to finality so that we could derive the full benefit of them.
Today, we will reflect on the two remaining initiatives, namely the creation of the Revenue Authority; and the passing of the Audit Act of 2004.
Revenue Authority Act
The Guyana Revenue Authority (GRA) was established in January 2000 as a corporate entity with a governing board as a replacement of the two government departments – Customs & Excise and Inland Revenue – which were under the direct control of the Minister of Finance. The objective was to provide the GRA with greater autonomy and flexibility in the assessment and collection of revenues, free of direct ministerial involvement. However, most of the board members have a direct reporting relationship with the Minister. In addition, although appointments are for one year renewable, it is not publicly known whether there has been any change in composition of the Board since GRA’s establishment. As a result, the status quo remains virtually the same in terms of ministerial control.
In January 2007, the Government introduced Value Added Tax (VAT) at a rate of 16 per cent. VAT was intended to be a revenue neutral measure since a number of other taxes were abolished. However, this was not to be so. In his budget speech of 2008, the Minister acknowledged that VAT revenue exceeded projections by approximately 50 per cent. Several interest groups, including the main opposition political party, contended that VAT has caused a significant increase in the cost of living and has argued for a lowering of the rate. The Government appeared to have acknowledged this but is yet to take action in this regard. When one reflects on the various taxes that have to be paid and the amounts involved – income tax, corporate tax, property tax, capital gains tax, VAT, taxes on fuel and in the purchase of motor vehicles, among others – one can easily conclude that Guyana perhaps is one of the most heavily taxed countries in the world.
A key concern about the operations of the GRA relates to the violation of Section 23 of the Act which specifically prohibits the publication and disclosure of information to unauthorized persons. There is also evidence that the Administration has been using GRA as a weapon to silence those who are critical of it. This is rather unfoArtunate in that the revenue collecting agency of a country should be allowed to carry out its work free of political interference, as in the case of the IRS in the United States and the CRA in Canada.
There is a significant display of unexplained wealth as can be noted when one drives especially around the city and its environs. However, it is not known whether the persons involved are paying their fair share of taxes. We are yet to hear form the GRA what efforts are being made to investigate the sources of income of these persons in order to assess them for taxes. When last has the GRA carried out arbitrary assessments to force persons suspected of under-declaring their incomes to declare the correct amounts? As it stands, the brunt of taxation falls on the ordinary workers via the PAYE system and from VAT collections. The latter accounts for approximately 25 per cent of our taxed revenue.
It is also undesirable for the two top positions in an agency such as the Revenue Authority to be staffed by retirees. This is a clear indication of the absence of succession planning, and can be demotivating for those employees who aspire to progress through the organization.
Audit Act 2004
Since the early 1990s, efforts were made to introduce new legislation governing the work of the Audit Office to bring it in line with international best practice. Two key concerns at the time relate to: (a) the lack of direct reporting to the Legislature; and (b) the involvement of the Executive in determining the level of resources needed to enable the Audit Office to discharge its mandate consistent with the provisions of the Constitution. These as well as other concerns had led to the perception that the Audit Office was not independent of the Executive whose work it had to evaluate. However, efforts at reform were met with fierce resistance from the Government.
It was not until 2001 through discussions with the Constitutional Review Commission that the necessary amendments were made to Article 223 of the Constitution to provide for; (a) direct reporting to the Legislature via the Speaker instead of through the Minister of Finance; (b) the Public Accounts Committee to exercise general supervision over the functioning of the Audit Office; and (c) the Audit Office’s expenditure to be financed as a direct charge on the Consolidated Fund determined as a lump sum by way of an annual subvention determined by the National Assembly. In addition, for the avoidance of doubt, the public accounts of Guyana have been defined to include: (a) central and local government bodies and entities; (b) all entities in which controlling interest vests in the State; and (c) projects funded by way of loans and grants by a foreign State or organization.
Following the passing of the FMA Act and the repealing of the Administration section of the Financial Administration and Audit Act, it became necessary to have separate legislation governing the work of the Audit Office and to incorporate the constitutional amendments of 2001. Under IDB funding, a consultant was recruited to assist in the drafting of the new legislation which was substantially reworked. The draft legislation was presented to the Administration some time in 2003. It included qualification requirements for the Auditor General. However, this did not find favour with the Administration, and those requirements were removed from the final legislation. The circumstances surrounding the appointment of the current Auditor General is public knowledge and need not detain us. Suffice it to state that the position of Auditor General is equivalent to that of the Chief Justice in terms of salary and conditions of service. The position should therefore be held by a senior and highly respected public official who can uphold the constitution requirement of not allowing himself/herself to be subject to the direction or control of any person or authority. The Auditor General should be seen as the fearless champion of public accountability.
There are two other disturbing features that the Administration inserted into the new legislation. The first is that the Government may cause an additional audit to be conducted by an auditor other than the Auditor General where an agreement entered into between the Government and an international financial institution so dictates. This is obviously inserted to negate the effects of the constitutional amendment relating to the definition of public accounts and the role of the Auditor General in this regard. When he was the Minister of Finance, the former President fought the Auditor General tooth and nail to have private auditors audit World Bank and IDB-funded projects. This was long before the discovery of the “Stone Scam” uncovered by the Audit Office in relation to an IDB-funded project.
The second concern is that the Minister of Finance may request the PAC to cause an additional audit to be conducted by an auditor other than the Auditor General. The background to this amendment relates to the Government’s unease with the reports that the Auditor General issued at the time. Here again, we can refer to “Stone Scam” report which the Government never accepted despite the fact the World Bank investigators confirmed that fraud was involved. Because of this, the loan agreement was terminated. Then, there is the “Dolphin Scam” report which provoked the venom of the Administration and precipitated the premature departure of the Auditor General.
Next week, we will discuss an action plan for improvement in public financial management which the new government formed as a result of the 11 May 2015 elections may wish to consider.
