With the advent of oil and gas and increased interests from various countries to sign tax treaties with Guyana, the local revenue body is increasing its capacity to effectively negotiate such treaties to avoid tax evasion.
“I have seen too many past agreements negotiated without inputs from tax technicians which have led to the transfer of wealth from small developing countries to developed one,” Commissioner General of the Guyana Revenue Authority (GRA) Godfrey Statia said on Thursday.
He was addressing a workshop on CARICOM’s Double Taxation hosted by Christopher Ram and Associates.
The Commissioner General said that under his watch, GRA has been actively engaged in these negotiations but there are many reasons why caution should be taken.
The Commissioner General said that as a negotiator he has found that such agreements can be used for tax evasion or tax avoidance since the income gets taxed nowhere.
The body will also be reviewing current tax treaties to ensure that Guyana benefits.
Statia said the GRA is presently preparing recommendations to the Minister of Finance to have certain aspects of these signed agreements renegotiated and updated to reflect our changing times and economy.
He said “Our economy has changed tremendously since the present treaties were signed.”
“I firmly believe that tax treaty negotiations should ensure multinationals are taxed where economic activities take place and where value is created,” the Commissioner General added.
Guyana has Double Taxation Agreements (DTA) with Canada and the United Kingdom. It also has a Tax Exchange Information Agreement (TEIA) with the United States of America and one is in the pipeline to be signed with Kuwait.
According to Statia, a DTA was negotiated and approved by Cabinet to be signed with the United Arab Emirates while negotiations with at least four other countries are ongoing.
He reported that since the advent of oil, many countries –all of them more developed than Guyana —have been approaching the Government to negotiate such agreements.
GRA is strengthening its system by moving to set up a special international tax section to deal exclusively with such matters.
Double Taxation Agreements seek to prevent the same income from getting taxed twice while TIEA’s provide for the exchange of information on request relating to a specific criminal or civil tax investigation or civil tax matters under investigation.
The Commissioner General recommends Guyana pursue only TIEA’s and not DTA’s with tax haven countries.
“If we don’t we will see our tax dollars leak offshore through abuses of DTA’s by multinational investors,” he noted.
He explained that the treaties do not provide an adequate basis for adequate tax information exchange between developing and developed countries, and in particular with secrecy jurisdictions.
As such, multinationals who are mostly from developed countries, usually channel investments through intermediary companies formed in convenient jurisdictions so they can take advantage of treaty shopping. Treaty shopping allows for low or zero tax pathways through the international tax system with some countries deliberately facilitating these pathways by setting themselves up as conduit countries.
“These are but a few reasons why we as a developing country out to be cautious,” he said.
Thursday’s workshop targeted accountants, tax specialists, regional companies doing business in Guyana and Guyanese companies/ individuals considering the CARICOM Market. The workshop was held at the Georgetown Club, Camp Street, Georgetown.
The Commissioner General said since tax technicians are expected to administer such international agreements, they should be actively involved in such negotiations, and not to be left to foreign service officers and politicians.
