Waivers still costing gov't billions
Published:Friday | July 9, 2010 | 12:00 AM
Sabrina Gordon, Business Reporter
Two years after dismantling a number of revenue-draining tax waivers it said it found on assuming office in 2007, the Government still does not have a comprehensive policy to guide its approach to the issue.
But Prime Minister Bruce Golding has said a procedural guide is on its way, and the administration is now head-hunting a coordinator for the project.
According to a government document setting out the terms of reference for the initiative and its head, the project is aimed at streamlining the existing waiver-granting regime and reducing the loss of revenue its creates for government coffers.
In 2006/07, discretionary waivers by the finance minister alone amounted to J$12.5 billion, or more than J$1 billion per month. The current data suggests little change.
In December 2009, for example, discretionary waivers approved by the finance ministry were more than J$1.72 billion, and in January 2010, J$916 million.
The recruitment document for the consultant, a copy of which was obtained by the Financial Gleaner, noted that for decades, the granting of various duty waivers has significantly worsened government tax collections, and continued despite the country's fiscal constraint.
"We are doing a comprehensive review of the range of incentives that we now offer, some of them so outdated that they represent a loss of revenue," Golding said last week, raising the same concern two years on.
"This is going to significantly reduce the range and extent of the incentives and the terms under which these incentives are given," the prime minister told securities dealer, with whom he spoke recently.
"It is not going to be universally popular, but it is one of the things that we have to do, as we are going change the way how we do business."
Among the listed deliverables, the coordinator of the effort is expected to develop a framework inclusive of processes, procedures and guidelines that inform the rationalisation of waivers and enhance transparency and accountability in the system.
The person is also expected to "identify and document weaknesses and inherent gaps in the current waiver system and establish clear and objectively verifiable criteria for the granting of, renewal or expiration of waivers".
With a deadline of July 9, today, for the receipt of application for the consultancy, the waiver project is expected to be completed before the end of the year, under an initial three-month contract.
In 2008, Golding signalled that the Government would be moving to place restrictions on the types of waivers that can be granted by ministers as well as a limit on the amount that can be waived.
In that year, for example, the administration curbed motor vehicle duty concessions for public-sector workers, to autos not more than 2500cc and with a value not exceeding US$25,000.
Despite howls of protest from civil servants, the Government has not budged, insisting instead that the new stricture would also apply to parliamentarians and parish councillors.
But despite his indignation and having advised Parliament that the minister of finance and the public service would be making a submission to Cabinet, aimed at defining the policy governing ministerial waivers, the policy is still not in place.
"We have imposed serious curbs on the granting of waivers not only because they are disruptive, but also because they create so much room for corruption," Golding said last week.
Only this week, news came that a senior director in the taxation policy unit of the finance ministry had been brought up on fraud charges for allegedly fraudulently assisting a motor vehicle importer in obtaining a customs duty waiver worth J$1.2 million.
In the current data for waivers obtained from the Ministry of Finance's website, the list includes charitable organisations, churches, schools and associations, of which Food for the Poor tops the list as the single largest beneficiary with a combined J$1.8 billion of waivers over December 2009 and January 2010.
But the list also includes government departments and companies, among them - J$166 million for Island Car Rentals; J$60 million to Golden Grove Sugar Company/Seprod; J$75 million to National Meats; a near J$60 million to Content Agricultural Products, and J$5.8 million for Inland Revenue Department.
The Finance Ministry also approved GCT waivers of J$3.67 million in January; PAYE waivers amounting to J$3 million in December and J$1.8 million in January; and J$2.86 million for transfer tax and stamp duty in January.