High rates of taxation fuel corruption

AS part of considerations for the national budget, I submit that the high rates of taxation in its various forms invite and ultimately fuel corruption. Consequently, the evasion of taxes enables a parallel economy which, in Guyana’s case, is perhaps as large as the legal economy. I highlight the evasion of duties through the Customs and Trade Administration of the Guyana Revenue Authority (GRA) with one category – vehicles.

A compromise was reached with importers of motor vehicles that were four years or older when the previous Administration received many complaints about under-invoicing.
Thus, the “flat” rate was introduced for those older vehicles. The result was that older, higher-maintenance vehicles were forced upon Guyanese at considerably high final costs; in many cases 100% of the CIF value.
For example, a 1500cc 2002 Toyota Allion motor car with a CIF value of US$5,000 attracts import tax of an additional US$5,000 and in the dealer’s case, plus VAT.
So, a 13-year-old vehicle is sold in Guyana for more than 100% of its imported value. The ordinary citizen is forced to accept that because the alternative to purchasing a newer vehicle is even more ridiculously taxed.
However, the elite among the population, most notably politicians, re-migrants, embassies and the politically connected have found ways of inducing the Remissions Unit of the GRA to import the said vehicles, duty- free.
All are fully aware of the market value of the heavily taxed vehicles so they work the system within the GRA. Politicians and other public servants “sell” their duty-free vehicles. Even “legitimate” importers such as embassies realise the windfall when they sell their five-year-old, enclosed 4X4s for more than double the original imported cost.
The ambitious but lesser mortals are however forced to grease the wheel to gain access to their own duty-free vehicles. They use money from unreported income to do so, because the alternative of using legal incomes would be self-incriminating. The recipients of the inducements themselves cannot report that income and so the parallel economy thrives.
I recommend to the Minister of Finance that all vehicle import taxes be reduced to no more than 20%, regardless of year and to require higher licence fees for the larger cubic capacity engines vehicles. In doing so the Minister would be putting an end to the corruption that accompanies high taxes on vehicles.
Legitimate importers would then have the benefit of the tax deduction for his “luxury” vehicle, instead of having to find financially creative ways to obtain the duty-free which becomes part of an illegal economy.
In closing, the example of a 2015 Toyota Land Cruiser, 3000cc, imported legitimately at the cost of US$75,000 with a 20% tax rate will earn the country US$15,000.
In the current system it would earn a one-off US$185,000 (app). That would be wonderful if it ever occurs. Over the past 20 years I dare say that no one would have imported any passenger vehicle over 3,000cc without a duty-free letter.
Yet, anyone that looks around the country can find hundreds of those new models higher cc vehicles. The Rolls Royces, Bentleys and Aston Martins were not imported by the embassies. So, if the applicable import tax wasn’t paid, how are they licensed? In the example, if the Minister of Finance were to increase the licence fee to US$2,500, over 10 years, the country would earn 15,000+10×2500=$40,000 instead of 0 that the current corrupt system gives.

S. PERSAUD

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