In the final NCN debate on institutional corruption broadcast recently, Senior Minister of Finance Dr Ashni Singh accused Mr Moses Nagamootoo of the AFC of “pretence,” “misrepresentation,” “opportunism” and “making false charges of corruption” against the PPP/C.
In an attempt to show how far the government has gone to remove the opportunities and possibilities for corruption, the Minister said on the programme that in the case of the tax laws, his government has “removed opportunities for discretion, imposed rigid rules-based system over all aspects of the corporations, rules have been framed for the granting of incentives …” The facts show otherwise.
What makes the Minister’s accusations so contrived is that he could not have forgotten the infamous case of the Ramroop group in which he and Mr Jagdeo rushed to grant illegal tax concessions to the group. And when confronted with the embarrassment of the illegality – which Dr Singh missed not once but thrice – he spearheaded a change in the law to legalise the concessions to the government’s friend. That cannot constitute a rules-based system.
What was ironic about the accusation is that by his false boast of removal of discretions, the Minister committed the same error of which he seeks to accuse Mr Nagamootoo. A tax holiday under the Income Tax (In Aid of Industry) Act is easily the most valuable tax concession available, and its award is substantially discretionary. This is how the relevant section of the Act begins:
“Notwithstanding anything to the contrary contained in the Income Tax Act or the Corporation Tax Act, it is hereby provided that the Minister may grant an exemption from corporation tax…” (emphasis added).
Readers might be aware that by law once an entity is exempt from Corporation Tax, it is also exempt from Property Tax (section 6) and Capital Gains Tax (section 5). These combined concessions can run to ten years and cost the country billions of dollars in lost revenues. Spin it how much one wants, the language and the power are clearly discretionary.
A less known but certainly not inexpensive concession is contained in the Value-Added Tax Act. By regulations made by the same Minister, any supply of goods and services under an investment agreement entered into on behalf of the government is zero-rated. This means that while the entity does not have to charge VAT on its supply of goods and services, it can recover any VAT it pays on its inputs. The Minister responsible for that Act (Dr Singh) has not indicated the criteria, if any, which a company must meet to qualify for an investment agreement or, that it is he who has the final say on whether or not a person qualifies.
And to go back to the tax holidays, the Minister of Finance who confidently makes such statements that “it is a matter of public record” and that this or that person “ought to know,” must himself know that the Investment Act requires him to publish information regarding tax holidays incentives under the Income Tax (In Aid of Industry) Act. Would the Minister say how transparent and compliant the government has been?
To compound the institutional silence and dereliction, the Act also requires the Audit Office to carry out annually a process audit of the concessions and to make a report to the National Assembly “within six months of the end of each of the financial year.” June 2005, 2006, 2007, 2008, 2009, 2010, 2011 and 2012 have come and gone since the Investment Act became law. Would the Minister say for which year any such a report was made to the National Assembly?