THIS past week, big noise was raised about Guyana’s tax to Gross Domestic Product (GDP) ratio. The chief messengers of doom were Kaieteur News and Christopher Ram.

This is one big hullabaloo about nothing. A read of the Kaieteur News article reveals that the writer has no clue about what the indicator represents. What is worst, ate the comments by Christopher Ram, Guyana’s pre-eminent expert on everything.

It exposes a complete lack of analysis and a chronic fixation and tykish petulance to rush to generalised hypercritical commentary for any angles that would make the government look bad, even when he does not understand what the hell he is saying.

Ram takes a fable-ridden excursion into the realms of irrationality by asserting that a low tax-to-GDP ratio means there is reckless management of the oil economy.

He further asserts that this ratio at its current level makes us look “foolish.” This is a fundamental misapprehension and misuse of the applicability of this statistic.

Ram’s commentary is superficial, to say the least and incompetent at best; he blatantly ignores other sections of the very report he referenced.

The tax-to-GDP ratio by itself tells little or nothing about the economic health of most countries. It is one of those measures that can be classified as empty indicators.

The publishers themselves indicated that while the ratio has useful interpretive applicability for countries with a similar structure as those in the Organisation for Economic Co-operation and Development (OECD), caution must be taken when utilising the statistic for the Latin America and Caribbean (LAC) countries, because of the vast differences in economic structures even at the inter-group level.

The report has a two-year lag in the statistical base, essentially reporting on activities up to and including 2023.

It must have escaped Kaieteur News and Christopher Ram that the report urges caution, because of the lack of uniformity of existing source data, in that, countries conform their national accounting structure exclusively to one or a mixture of three separate national accounting protocols, and an equalising weight would be necessary when making country-to- country comparisons.

As a result of this; attempts are being made to harmonise regional national accounts under a standardised regime referred to as the System of National Accounts (SNA).

Even this attempt at harmonisation is fraught with complications; the designers themselves admitted that the SNA functions best in market economies.

So, the extent to which a country may lack market elements may render the extracted indicators useless.
Further, there is an impact from differences in fiscal-year periodisation, in that, most countries do not conform to a January to December accounting cycle, making it difficult to disaggregate and reconstitute without losing accuracy.

Even further, when the System of National Accounts (SNA) is pitted against the IMF’s Government Finance Statistics (GFS) system, it shows further structural accounting differences that will negatively impact a blanket non-nuanced interpretation of cross-country tax indicators.

Because of these differences and the ongoing attempts to harmonise national tax statistics, the authors constantly go back to previous years and change the rates already published, so that each succeeding year’s report is essentially an addendum compendium.

The most significant aspect of the report is that the very “Revenue Statistics in Latin America and the Caribbean 2025” indicated that pure Tax-to-GDP Ratio is a poor and misleading indicator for the LAC countries.

The report admitted that previous publications presented an incomplete and possibly misleading indicator by over-reliance on the unrequited tax component of government income.

For a more useful analysis, one would have to turn to the income-to-GDP ratio. Taxes only tell part of the story regarding government intakes. In recognising this grave omission in previous reports, the OECD et al have added an entire section on Non-Tax Revenue, along with a discussion on the importance of non-tax revenue to the totality of government revenue in relation to GDP flows.

This is necessary because nations have found ways to balance tax and non-tax revenues to yield desired revenue outcomes. So, when non-tax revenues are added to the pot, Guyana jumps to number three as a percentage of GDP among LAC countries.

The 2025 report rightly recognised that it’s the totality of income into the coffers that matters, rather than pure “compulsory unrequited payments to the general government.”

The Government of Guyana made a deliberate and thoughtful effort to reduce the tax burden on its citizens, attributed to an exponential increase in non-tax revenue chiefly from oil. So, measures such as increasing the number of zero-rated VAT items, reduction of excise tax on fuels from 30 per cent then to 10 per cent and eventually to zero; increasing the income tax threshold and reduction in personal income tax have made significant reductions in the tax- collection rates.

These reductions, coupled with a long-standing, large informal economy which keeps a large segment of the population outside of the formal income tax collection scheme. What this means is that the growth rate of GDP will naturally outstrip the growth in taxes. The most significant interpretation contained in that statistic is that Guyana is able to meet its budgetary needs without increasing the tax burden on citizens.

A reduction in the unrequited tax segment of the total government revenues will drop as a percentage of GDP whenever there is new discovery of a major technology or resource that leads to an above-average growth in GDP. This will continue for a few years until the structure of the economy adapts to changes in the structure of investment, saving, consumption, government spending and net imports.

We also need to understand why this ratio was developed. It was developed as a tool to gauge the potential of a country to meet its budgetary needs from taxes, its potential cash flows to keep the government solvent, along with its ability to invest or save a little for future needs.

Given the size of our national budget and the health of our Natural Resource Fund (NRF), there is little doubt that Guyana is in a good place. While non-tax revenues increased by 58.5 per cent, it formed only 37 per cent of the national budget.

So, it’s one of two things: Either Ram does not understand the applicability of the indicator or he is a dishonest analyst. Take your pick.

DISCLAIMER: The views and opinions expressed in this column are solely those of the author and do not necessarily reflect the official policy or position of the Guyana National Newspapers Limited.