Posts Tagged ‘Guyana Revenue Authority’

Threshold Country Plan/ Implementation Project was a major failure

Sunday, February 28th, 2010

Introduction
It was interesting to see almost the entire Cabinet turn out on February 17 at a ceremony at the Georgetown Club to mark the end of the Guyana Threshold Country Plan/ Implementation Project (GTCP/IP). The two-year project, financed by a US$6.7 million grant from the (US) Millennium Challenge Corporation (MCC), was launched on January 14, 2008, reportedly with the specific aim of supporting government’s efforts to overcome the country’s serious fiscal challenges while also streamlining the business registration process.

With the project closure coming soon after the 2010 Budget projecting a record deficit for 2010, it had to be diplomacy rather than reality for Director of Threshold Programmes, Mr Malik Chaka, to report to the assembled dignitaries on the successful implementation of the project, an assessment echoed by President Jagdeo and Dr Ashni Singh, Minister of Finance. Even if the 2010 Budget was overlooked, the assessment was not borne out by the results of other elements of the project. Indeed, the ultimate test is that Guyana did not qualify for further assistance under the programme, a sign of failure, not success.

From conception to conclusion, Guyana’s performance on the project was sub-par. Identified by the MCC on November 8, 2005 as eligible to receive Threshold Programme funding, Guyana had to secure assistance from the MCC to enable it to make its proposal. That was accepted by the MCC on June 27, 2007.

E-mail and telephone consultancy
During the course of the project, US consultants MetaMetrics Inc provided “performance-based management systems technical assistance… through email and telephone communications.” According to this firm’s website, the Government of Guyana requested the support of the MCC to provide technical, institutional and operational support in:

(i) the preparation and implementation of a value-added tax (VAT) while at the same time strengthening the institutions involved in tax administration and tax policies;

(ii) the transformation of Customs administration;

(iii) transformation of the institutions that provide fiduciary oversight on the utilization of public resources; and

(iv) completion of government procurement reforms.

According to the Final Draft Report (FDR) dated June 26, 2006, the project was a continuation of the government’s “comprehensive fiscal reforms” in the area of reducing the fiscal deficit and improving transparency, accountability and fiduciary oversight. According to the FDR, these reforms, which have received financial support from the World Bank, IMF, IDB and the CARTAC, are expected not only to alter the fundamental structure of revenues and expenditures but more importantly, to strengthen the institutions involved in tax administration and oversight, leading eventually to a progressive reduction in the fiscal deficit.

The plan
Nathan Associates Inc, another US consulting firm was appointed Implementing Partner for the project. The ‘local’ face of the project was Dr Coby Frimpong, supported by a small number of Guyanese employees. The government would, of course, be aware of how the US$6.7 million was spent, and in the spirit of transparency and accountability, should disclose how much was paid to MetaMetrics, Nathan, and Dr Frimpong who for many years was the country’s highest paid consultant, until that prize went to another foreign, non-resident consultant. It would be interesting to know too, whether the value of the grant has been incorporated in the national accounts, as required by the Fiscal Management and Accountability Act.

MetaMetrics noted that the Guyana Threshold Country Plan Implementation Project would be conducted through the following six tasks:

1) Strengthening tax administration

2) VAT implementation

3) Creating tax policy and forecasting analysis capability

4) Improving expenditure planning, management, and controls

5) Empowering and creating capacity within two principal parliamentary fiduciary oversight committees

6) Business registration and incorporation

Assessing success
It is submitted that it is against these objectives that the success – or failure – of the project should me measured. Let us look at these, though not necessarily sequentially. Item 2 of course came one year after VAT had been introduced, and it would be disingenuous for the project managers to claim any success from VAT’s implementation. Mr Chaka’s praise of the collection of “more taxes and customs revenue” was not only ill-informed but is also not the kind of comment one expects.

Did he know, for example, the government’s commitment to make VAT and excise tax revenue neutral, when in fact it turned out that collections were 48% over budget, because of an error in the rate? Had any work been done by the consultants, they would have realised that the government, even after discovering its error, never publicly admitted or corrected it, or honoured its revenue-neutral commitment.

An informed analysis of the tax collections should extend beyond crude numbers to the composition of the direct and indirect taxes garnered by the GRA. The analysis should examine the composition of the taxes collected by revenue type, sectors, regions, and classes of taxpayers. Did any of the consultants realise that using loopholes and tax shelters one major entity subject to a nominal rate of tax of 45% pays only 14% of profits in taxes? And that many others in a similar situation are not that different? Or that a person receiving a $10 million dividend from any such company pays no income tax, while an employee of the company earning $100,000 per month is required to pay income tax of $260,000 per year? Or that any pension, without limit, is tax free? Perhaps the consultants should have explained their concept of tax equity, to allow a fairer assessment of their own measure.

The missing GRA’s Annual Reports
It will take a dedicated column to examine the tax take and how the self-employed continue to evade taxes on a massive scale. The consultants should have asked the Minister of Finance why he has not brought in regulations to give teeth to the section of the Income Tax Act which empowers the Revenue to apply a presumptive method of determining the income of certain self-employed individuals. Suffice it to say that all the self-employed taxpayers of the country pay a mere 2% of the total income and corporation taxes collected by the GRA. This modest increase by this large group is partly because, as this column has consistently pointed out, a number of previously incorporated trading companies have de-registered, immediately and automatically reducing their tax rate from 45% to 33⅓% and excluding them from the minimum corporation tax of 2% of turnover. If proof be needed, the numbers show that corporation tax as a percentage of tax revenues has declined from 23% to 20% from 2006 to present. Yet, the self-employed percentage has remained fairly flat.

But tax administration would also require better governance, accountability and transparency in the Revenue Authority. I have recommended on numerous occasions that the annual report of the GRA provide useful statistical data on revenue collections to enable informed statistical analysis. Instead, in blatant violation of section 28 of the Revenue Authority Act, the Minister consistently fails to lay the annual report in the National Assembly. This is the same Minister who in his 2010 budget speech railed against persons not providing information to his Bureau of Statistics, describing non-compliance as “unacceptable and unlawful,” and threatening steps to enforce the law.

The missing tax policy
In relation to task 3 above, there has been no progress and therefore, not surprisingly, no report. The consultants were of course at a disadvantage. If the government and the Minister are not serious about tax policy, no consultants could make them become so. It takes a special government to care about tax sources or their impact.

Others care only about quantum and this government has been almost unique in that it has never been hard-pressed for revenue to finance its policies – some good and others less so. Debt-write off, on the back of poor country status, helped the government increase expenditure on the social sector, such as health and education. And just when the write-offs started to dry up, there came the annual windfall from the VAT and Excise Tax. VAT and Excise Tax in 2010 will double the collections in 2006 of the taxes they replaced, even as the economy grew by an average of 3% over the five year period.

Bureau of Statistics workshop
The consultants also probably did not notice, but according to the 2010 budget speech, the country is not nearly as poor as the government was representing it to be. With the Finance Minister now saying that the economy is actually 69% better off than would have been previously calculated, each Guyanese is now much, much better off than we had been told, if not felt. No one has bothered to say how rebasing could actually increase the value of goods and services produced in the country, but the public would no doubt be looking forward to the workshop which the Minister of Finance promised that the Bureau of Statistics would host “shortly” to provide technical details on the rebasing exercise.

Had the rebasing been done earlier, we may very well not have qualified for some of the assistance and concessions we have received from all and sundry.

But there is a more direct connection to tax revenues. The working person is paying income tax at 33⅓% taxes and VAT at an average of a minimum of 10% (to allow for zero-rating and exempt supplies), averaging about 40% and on top, another 5% to NIS which is a form of taxation. At the other extreme are companies, self-employed persons including the new army of government consultants and contract employees; those whose salaries are exempt and whose income comes from unearned income, such as dividends, interest and rents, bear considerably less than half the tax borne by the employed persons.

Since 1994, I have pointed out the inequities in our tax system. These were later identified in National Development Strategy 1 and 11. In fact this is what NDS 11 says, in part, about our tax system:

“Income taxes in Guyana appear to be inherently unfair, since persons in the informal economy, and almost the entire agricultural sector, indeed almost all in the self-employed category, do not pay them…”

If anything, despite all the studies, consultancies and promises, the situation has become worse.

To be continued

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Question: What’s the difference between tax avoidance and tax evasion?

Sunday, October 11th, 2009

Answer: the thickness of a prison wall

That is how the former Labour Chancellor of the Exchequer in the UK, Denis Healey defined the two related practices but which have distinctly separate consequences. He was also tough on tax evasion and also said “It will squeeze the rich until the pips squeak.” The first quote in fact matches the general view on the contrasting level of permissibility of what others may call aggressive tax practices. Remember however that Mr. Healey made his statement decades ago. Internationally, things have changed since then and not only tax administrators but legislators and very importantly, the courts, certainly in the more advanced economies, are taking more direct action against aggressive tax practices.

It may in fact be due to Bush’s War on Terror targeting not only those who pulled the trigger or threw the bomb but those who financed those who pulled the trigger or threw the bomb. The evidence is that the coordinated and sustained efforts to contain domestic tax evaders and the tax haven jurisdictions that have for decades facilitated them are yielding significant results. As one international tax specialist wrote recently, “the seemingly endless game of cat and mouse seems to be shifting largely to the cat’s advantage.”

In 2008, Germany paid an informant for records taken illegally from a Liechtenstein bank, in an effort to track down German tax cheats including some of its international tennis stars. But it was the United States that has shaken the very foundation of Swiss bank secrecy – which essentially forbids access to information of or about the account of any person other than the account holder – when it demanded from the Swiss bank UBS the names of 52,000 account holders suspected of tax evasion. The Swiss initially refused but the tide had been turning against those “fiscal and moral termites who have been eating away at tax revenue bases throughout the world in an unprecedented fashion over the last thirty or so years.”

The Swiss blinked and now the Obama Administration is planning to go even further with the enactment of new legislation, the Stop Tax Haven Abuse Act – that is designed to better enable US authorities to obtain information about offshore trusts and accounts used by Americans to hide their income and assets from the Internal Revenue Service of the US. The position is that the US can access the information under the scores of Double Taxation Treaties which the US has with countries across the world or under what are called Tax Information Exchange Agreements such as the one it has with Guyana. In the alternative, the US simply threatens sanctions against those it considers uncooperative.

Tax evasion, tax avoidance and tax planning
It seems fairly simple to distinguish between tax evasion and tax avoidance. It is the difference between working outside the law and working within the law (though against its spirit). Tax evasion can and often is contrasted with tax avoidance, but also with tax planning/mitigation, and it is here that the issue becomes difficult. Tax evasion typically involves the non-payment of a tax that would properly be chargeable if the taxpayer made a full and true disclosure of income and allowable deductions. Common examples of tax evasion include a deliberate failure by a business to report the full amount of revenue received or the deliberate claiming of a deduction by a business for an expenditure it has neither incurred nor paid. There is no ambiguity about tax evasion – it is illegal and a crime under our laws. On the other hand, tax avoidance can be considered either as permissible or impermissible, although they are not that easy to distinguish.

Tax planning or tax mitigation can be traced back to a well-known and oft quoted case involving the Duke of Westminster in which the court ruled that “every man is entitled to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be”. One simple example of tax planning is where a business promoter makes his decision on the form of the entity on the basis of the applicable tax considerations. If the trader was to set up a company it would be taxed at 45% and be subject to Minimum Corporation Tax. On the other hand if he operates under his or a business name the profits all accrue to him and the trader would be taxed as an individual at the personal tax rate of 33 1/3%. Tax planning may also include the decision to lease or buy an asset which would have different tax consequences but both of which are entirely legal.

Pandemic
Where it becomes really difficult is in respect of “impermissible tax avoidance”, which refers to artificial or contrived arrangements, with little or no actual economic impact upon the taxpayer, and which are usually designed to manipulate or exploit perceived “loopholes” in the tax laws in order to achieve results that conflict with or defeat the intention of Parliament. In fact this is what section 74 of our Income Tax Act seems to address but uses the words “artificial” and “fictitious” and gives the Commissioner wide powers to disregard or set aside such transactions. In tax jargon our section 74 is a general anti-avoidance rule (GAAR) and is designed to protect the revenue base from erosion by “fiscal termites” that seem to have created a pandemic in our economy, much worse than any Swine Flu or AIDS. .

Since revenue collection is a primary function of any tax system, any systematic and widespread avoidance activity will clearly have an adverse impact on that function. But avoidance does more than this – it also significantly affects the efficiency and equity of tax systems by siphoning off resources from more productive ventures, redistributing the tax burden and threatening to undermine compliance. We seem not to care that the poor employees are burdened by high and unavoidable tax personal taxes and wrongly charged VAT, all for the benefit of the private sector entrepreneurs, a term that has come to include drug dealers, money launderers and tax dodgers.

Changing administrative approach
Across the major economies, national revenue authorities have been taking measures to identify and shut down perceived impermissible tax avoidance activities. Within the UK, Her Majesty’s Revenue and Customs Anti-Avoidance Group co-ordinates anti-avoidance activity including litigation strategies in relation to avoidance. To counter tax avoidance, the Group deploys its resources where it considers the risk greatest and provides direction for the effective use of resource within other areas of HMRC. The approach is now a form of cooperation between the tax authorities and larger entities that is designed to bring about effective consultation, certainty and speedy resolution of tax issues. Changing from the old command style tax administration to a more co-operative approach, the authorities enter arrangements with the taxpayer whereby the latter would submit its tax strategy on a particular issue and have this cleared by the tax authorities in return for which it is saved the time and cost of revenue audits and litigation.

Another approach is increased cooperation among the tax authorities of various countries with the Organisation for Economic Cooperation and Development (OECD) and the Joint International Tax Shelter Information Centre set up by Australia, Canada, the UK and the US being prime examples.

The tax authorities are also aware that much of the tax avoidance by the big companies is hatched and or blessed by their tax advisors.

They have therefore not been hesitant to go after the larger accounting firms that design and market packaged boutique packages sold under attractive but expensive labels including asset protection and the virtues of mainly offshore tax shelters.

Both corporate as well as high-net worth individuals seems to consider the risks associated with tax evasion as more than compensated for by the rewards.

The changing attitude of the courts
The Duke of Westminster case (1936) has long dominated the thinking of the courts and more recently they have propounded what is called the Ramsay principle (1982) under which the courts would examine transactions that seem to have no commercial purpose and ignore or set them aside as envisaged by section 74 of our Income Tax Act.

The Ramsay principle was seen as a separate theory of revenue law which said that tax laws must be interpreted very strictly in favour of the taxpayer. That principle appears to have ended in 2005 in a case that came before the House of Lords.

The latest case essentially ruled that tax provisions dealing with tax evasion should be given a purposive construction which could have wide effect since all anti-avoidance measures are designed to prevent tax evasion. But life will never be as simple as this and no doubt the courts will continue to be challenged by the creativity of tax advisors and dishonest taxpayers even as the nature of transactions become ever novel and complex even for tax administrations.

The Guyana scene
There does not appear to have been any reported case out of the Guyana courts addressing section 74. That is equally true of the region with one notable exception in Jamaica, involving a leading case on asset stripping, under similar anti-avoidance provisions.

On the other hand, there are some frequently used permissible tax planning strategies, none of which again appear to have reached the courts but this is because they have not been challenged by the Revenue Authority. Some of the more common strategies include the structuring of the business (corporate or individual); the efforts to take advantage of the differential tax rates applicable to companies (non-commercial company and therefore taxed at 35% or commercial and taxed at 45%); and transactions designed to benefit from low or no tax under some of the provisions under Double Taxation Treaties of which the Caricom Treaty is a prime example.

What seems more common is the rank tax evasion where income is blatantly ducked and the money laundered abroad under the permissive exchange control regime we enjoy and very often abuse.

Another is to charge all forms of personal expenses to the business and get full deductibility while yet another is the use of fake invoices which overstate the figures in the accounts and understate those given to the Customs, both of which are accepted unknowingly by the GRA. Businesses can generally count on finding a friendly accountant willing to sign off on their make believe financial statements that seem to get past just as easily, the tax authorities as well as the lending institutions.

Guyana is the only regional country that has a net property tax capturing the assets held here and abroad. The overseas assets are almost invariably overlooked by the GRA despite arrangements that allow for the exchange of information with the tax authorities of all our major trading partners. The Cambios seem custom-designed to facilitate such evasion while the country appears only willing to pretend that we have serious intentions about preventing money laundering.

One glaring example of how tax evasion takes place under the noses of those in administrative, political and professional positions is with respect to political donations. It is known that businesses contribute significantly to the elections war chest of the major political parties, sometimes more than they pay in taxes. Yet, none of this gets its way into the books. Is it just possible that some of these donors who are feted under the full glare of publicity actually pay more to the political parties than in taxes? Or is it that they consider that this gives them tax immunity?

Conclusion
Tax reform in our case has first to deal with tax evasion and administration. This government has been paying lip service to tax reform ever since it came to power seventeen years ago. Unless it thinks that imposing VAT on top of high personal tax rates is tax reform, it has done nothing and tax evasion is now worse than it has ever been. VAT has brought in immoral windfalls, reducing the incentive for reform which the Government has delegated to the National Competitiveness Strategy. So far, that body which is chaired by the President has shown no intention, appetite or capacity to deal with it. And the GRA is either overwhelmed by the level and scale of tax evasion or is not utilising the tools and deploying the resources at its disposal to deal with the crisis.

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The boring auditor

Sunday, September 13th, 2009

Introduction
The stereotypical auditor as a fat, prematurely aging, bald, boring and unenterprising man probably says as much about the audit profession as it does about its practitioners. For many forced to use their services, they are just a necessary cost imposed by the law, spending several weeks at great inconvenience to the management and staff, to write a single page report for which they charge a bomb. They are not even worth a good joke, and the most famous but yet barely quotable one is how many auditors it takes to change a light bulb, with the answer being the question: How many did it take last year? It is also true that on most occasions when we consider the auditor, it is to ask the question, but where were the auditors? Where were they in the Enron saga or the spate of frauds that rocked America in the early part of this decade? Where are the auditors when a government squanders billions in corruption, nepotism and mismanagement? It is not entirely unfair to say that the profession is often perceived as concerned more with self-protection and self-preservation and limiting its liability for negligence than in adding value to its clients. This column is really not about the audit profession but only incidental to it, with a view to showing that the profession can be interesting for the practitioners (and hopefully their clients as well).

A week is a long time
After more than thirty-five years, I still find the profession interesting, so much so that I look forward to a visit I make annually to Berbice on audit business to meet not only with the clients of Ram & McRae, but with the business community and ordinary, everyday folks as well. To say that this year was the most interesting would be unfair to those staff of Ram & McRae, who were holed up in a small room while the heavily armed bandits created havoc at the Republic Bank Rose Hall branch a couple of years ago. But this year too had its own interest, even without guns or bandits. I learnt for example that in Guyana we still have cocoa tea and coffee tea and Milo tea. I was greeted by a businessman who made an unsolicited offer for my old-model car with the assurance that payment will be all in cash! I also had to fetch my suitcase up three flights of stairs in what described itself as a business hotel, even though there was no writing desk or telephone in the room in which I stayed. When I complained to the proprietor he lamented that the guard did not come to work that afternoon and that “no one wants to work these days.” Like his Georgetown counterparts he could not recognise that people want to work in a job that offers a remunerative salary, self-respect and dignity. That an economy built on plantation-type businesses is a backward concept, even though it is now being embraced by no less than our Russian-trained President.

As I carried my suitcase up those stairs I reflected whether our under-worked and over-exposed Ministry of Tourism has ever thought that these facilities should be rated so that potential guests can inform themselves in advance of the type of premises and services they can expect for the price they are called upon to pay. Many of these facilities that describe themselves as hotels are no more than guest houses, fit for nothing more than a few hours, and hardly the type of place for the businessperson or to take the family.

Guyana Times and Chronicle
At 10.30 am one working day, I could only find the Guyana Times and the Guyana Chronicle and wondered whether the Kaieteur News and Stabroek News, unblessed with state resources could not have vendors on the Corentyne. I learnt instead that the latter two were already sold out, while the Times and Chronicle were slow sellers, even in the strongholds. The vendor even offered to sell me these two at a discount! Seems that even the ordinary person on the street understands the principles of business better than those who manage and control the state-owned or state-friendly papers, which ignore any ideas of journalistic independence, impartiality and balance.

I experienced first hand as well the difference in the cost of living between what we in Georgetown pay and those in the countryside. I had a full, fairly balanced meal and a beverage for half the price of what one would expect to pay in Georgetown. I was so struck by what appeared to have been a mistake by the person who served me that I challenged the price charged. No, it was not a mistake.

In all of this I was an interested observer, noting some of the differences between rural and urban life. The one incident in which I was just more than an observer was when I went into a shop to buy an item and was given a small piece of square cardboard with the price written on it and told to go pay the amount stated to the cashier. I approached the cashier with money in hand and asked for a bill/receipt. It was just as if an alien or a bandit had entered the store! Some other person who I assume was the proprietor was summoned, and I found myself explaining that I needed the bill so I could claim back my expense from the office, which was not quite true.

One of those generic receipt books was then pulled out from somewhere and I left the store convinced that I had just become complicit in a tax-evasion scam.

The Republic
Berbice of course is not unique for its tax-evasion but it certainly has a reputation. Many years ago one senior politician well known for his creative language, described Berbice as a Republic with its own laws, customs and practices. Seems that nothing has changed. A Georgetown-based client of the firm recently told us customers and potential customers in Berbice were refusing to do business with him if he issued any invoices to them since they did not want to be part of the official records. I confirmed this with a Corriverton businessman who lamented the unfairness of a system in which the honest businesses are driven out by the tax-dodging ones.

The Berbice business person of course feels protected and special. With the knowledge that they are the home of the ruling party, they demand and receive anything they want, whether it is a bridge, a university, the removal of a police officer or a disproportionate share of the national budget. The businessman who hoards millions in his home to evade taxes expects the police to protect him and to respond at a minute’s notice to his call in an emergency. There are some homes in Berbice which would make you forget that you are in Guyana, because of their extravagance and opulence which borders on vulgarity. One wonders how the owners of these properties would account, if in fact they do, for such wealth in their Property and Income Tax Returns.

Berbice is very much part of Guyana and deserves to have services like everyone else. And should the rest of the nation begrudge that part of the country because it seems to be favoured by the ruling party and the government? But is it not right for the rest to expect that the Berbice businessman should be willing or if not, be forced to contribute to the coffers of the state? Some years ago I was told that one of the tax offices in this country did not bring in enough revenue to pay salaries for its own staff, and am aware that some senior owner-managers earned no more than the tax-free threshold. That would no doubt have changed by now, but by how much is anyone’s guess.

TRIP them up
That does not mean that I do not understand that a tax office may not collect all the taxes that arise from the businesses in a particular area or region, with GuySuCo being an obvious case in point. But I still do not understand the failure to make the annual reports of the Guyana Revenue Authority more informative and meaningful. We hear of the marvellous flexibility and capability of the multi-million dollar new computer programme TRIPS now used by the GRA. Could it not produce information by tax offices, regions, sectors, types of taxes, etc?

Part of the problem as well is that the GRA is too Georgetown-centric so that the best of its resources are devoted and dedicated to the better-equipped offices in Georgetown with staff in the regions being far less qualified and capable, comparatively, than their Georgetown counterparts. Corriverton is generally regarded as the smuggling capital of Guyana, but only the Georgetown Customs Officers have been the objects of presidentially-directed investigations.

And I continue to wonder why the GRA continues to issue so-called tax accountants and consultants with tax practice certificates to go out there and aid and abet businesses to evade taxes. In fact these certificates amount to licences to cheat and to rob the revenues of the country at the expense of the working poor and the unemployed, who have to pay PAYE and VAT at a rate that the government knows was wrongly calculated. In fact on the question of VAT I have heard of discussions among businessmen that they are better off with VAT, since only they know how much they collect and can therefore decide how much they share with the government. In practice, it makes them look better to the GRA because they use some of the VAT money they improperly withhold to pay their other tax liability. Let me not hesitate to state that such collusion is not restricted to the “tax consultants” but to the qualified accountants as well, who enjoy statutory exclusivity but many of whom seem not to understand that there should be corresponding professional and ethical integrity.

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The President does not have the power to issue instructions to the Audit Office

Wednesday, January 21st, 2009

In this letter I will seek to conflate two issues involving the President and the Auditor General (ag), Mr Deodat Sharma, which taken together convince me that neither of them understands key provisions of the constitution or the Audit Act 2004, hardly a trivial issue. My conclusion is based firstly on a report in the Stabroek News of January 13, 2009 under the caption ‘Customs workers facing forensic audit as bribery probe widens,’ in which Mr Sharma is quoted as saying that the process of a forensic audit into the assets of employees at the Customs and Trade Administration (CTA) needs to be thorough since, “President Bharrat Jagdeo would expect nothing less.” The second is also an article in the same newspaper of January 20, 2009 in which questioned about the commissioning of a report into the related Customs bribery probe, President Jagdeo is reported as saying that this particular report was “a bit different than the routine annual audit,” while Mr. Sharma said it was “unlike regular reports from his Office.”

Regarding the first issue, both the President and Mr Sharma need to be reminded that the constitution makes the Audit Office “not subject to the control or direction of any person or authority.” It goes without saying that that includes the President.

The Audit Act 2004 provides for two types of audit – financial and compliance audits and performance and value-for-money audits (under section 24 (1)) while section 24 (2) provides for the scope of work and broad methodology for the two types. Section 25 of the act sets a deadline of September 30 for submission of the Auditor General’s report on the consolidated financial statements and accounts of budget agencies, while section 26 provides that, “During the year, the Auditor General may choose to conduct special audits and at his discretion prepare special reports when such audits are completed.”

Where the Auditor General and the President fall into error with the President saying it was a debating point, is the scope of section 28 which provides as follows: “The Auditor General shall [N.B. not may], in accordance with article 223 of the Constitution, submit his reports to the Speaker of the National Assembly, who shall cause them to be laid before the Assembly.” That section refers to all reports and “whether it goes through the Speaker or Minister of Finance” as the President said, is more than semantics or a procedural issue. It is the result of a constitutional amendment designed to strengthen the independence of the Audit Office so that he reports not to the executive but to the National Assembly. Sadly, neither President Jagdeo nor Mr Sharma seems to appreciate the distinction.

To any reasonable person it must be clear that together the constitution and the Audit Act make the issuing of instructions by the President to the Auditor General to undertake an investigation into the Fidelity fraud allegations, to carry out so-called forensic audits of the assets of the employees of the CTA and the submission of reports by the AG to the President, unconstitutional and unlawful. After the sterling work done by his predecessor, Mr Anand Goolsarran, Mr Sharma is allowing President Jagdeo to bring the Audit Office into disrepute and it only takes a legal action by any officer called upon to submit to Mr Sharma’s “forensic audit” to have the whole process thrown out. In no country but Guyana would the head of the state audit with responsibility to audit often complex transactions in excess of two hundred billion dollars not hold a professional accounting qualification. One of the reasons for such a requirement is that the holder is subject to a professional code of conduct regulating the quality of his work and the integrity and independence he displays.

It is not that Mr Sharma has time on his hands or no work to do. In a review of the ‘Report of the Auditor General on the public accounts for the year 2006’ carried in Sunday Stabroek’s ‘Business Page’ of August 24, 31 and September 7, 2008, I pointed out some glaring weaknesses − errors of omission and commission of a professional nature in the work of his office. Perhaps a few examples drawn from those columns would suffice. The full articles are available on the Stabroek News website or at ChrisRam.net.

1. That the report did not mention the failure by the Privatisation Unit/NICIL to account for hundreds of millions of dollars, a fundamental breach of the constitution that ranks and rankles with the infamous Lotto Funds;

2. $6.513 billion advanced from the Dependants Pension Fund Deposit Fund at December 31, 2006 not being substantiated while the old Consolidated Fund bank account NO 400 had not been reconciled since 1988;

3. The failure by the Audit Office to report on the financial statements of entities in which the Government has a controlling interest;

4. Non-reporting of the hundreds of millions of flood funds which Mr Sharma had promised more than three years ago;

5. No report on concessions granted under the Investment Act, 2004, including the illegal concessions granted to Queens Atlantic Investment Inc, the saga of 2008;

6. No audit report on World Cup Cricket even as another cricket spending spree is planned next year.

The Guyanese public is accustomed to being misled by fancy-sounding but uninformed statements by public officials, some of which confuse even lawyers of the main opposition parties. The statement about forensic audit falls in that category when looked at against the quality of work referred to above and the persistent failure by the Audit Office to carry out its mandate. Mr Sharma it seems prefers to dabble in matters improperly referred to him by the President while neglecting his constitutional and statutory responsibilities such as his report for 2007 on the public accounts, already overdue by several months, and any value-for-money audits.

The Minister of Finance is a former Deputy Auditor General who served under Mr Goolsarran, and the government must therefore be aware of the several professional and personnel limitations of the Audit Office and those who control it. But since the government transacts business involving billions of dollars, often outside the norms of proper accounting, the constitution and the Financial Management and Audit Act, it is unlikely that it would like strong and independent oversight of such spending. So, really it is convenient for the government to have someone like Mr Sharma heading the Audit Office. In addition, the wife of the Senior Minister of Finance is employed as the only professionally qualified accountant in the Audit Office. By definition she is not independent and it is absolutely incompatible for her to be in the Audit Office while her husband is Minister of Finance.

To allow such serious farce in the Audit Office in my view shows contempt for the people of our bleeding country. All the talk of forensic audit is meaningless. On top of all of this, the parliamentary oversight body, the Public Accounts Committee seems completely out of its depth. Do Guyanese really deserve this?

I will deal with the President’s uninformed and misguided call for “MP’s to declare assets within two weeks or face the courts” in later correspondence.

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