Analysis and News

World Bank 2020: Doing Business in Guyana – Paying Taxes & Trading across Borders

BY GEOCAP's Contributor: Kayshav Tewari
Continued from "World Bank 2020: Doing Business in Guyana – Starting a Business, Getting Electricity and Credit"

Recap

Doing Business 2020, a World Bank Group publication, is the 17th in a series of annual studies measuring the regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 190 economies and over time. The report uses 11 indicators to gauge and compare the ease of doing business in any given country.

Paying Taxes

This indicator records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with post-filing procedures (VAT refund and tax audit). Out of a possible 100, Guyana scored a respectable 67.5 which placed it at a position of 122 out of 190 countries.

Factors which are taken into account for this indicator include the number of payments (of taxes and mandatory contributions) per year and the total tax and contribution rate (as a percentage of profit). In Guyana, for each year a total of 35 payments must be made – made up largely by monthly payments of NIS contributions and VAT payments (24 out of 35 total payments). In contrast, for OECD high income countries there is an average number of payments of only 10 per year – this is due to the contributions being paid on an annual rather than monthly basis.

While the frequency of payments can be considered high, they amount to a total tax and contribution rate (as a percentage of commercial profit) of 30.6. This is a low rate – compared to LAC and OECD High Income nations’ rate of 47 and 39.9 percent respectively – one that undoubtedly encourages investment and profitability.

The time that is taken to undertake these payments i.e. collecting information on and computing tax obligations, completing tax return and filing with agencies, and arranging payment, amounts to 260 hours whereas in OECD High income countries, it is just 150 hours. This time difference has to do with relative inefficiencies in our system when compared to online tax interfaces and electronic payments of more developed nations.

The final factor is the postfiling index which is based on four components—time to comply with VAT refund, time to obtain VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. Out of 100 Guyana scored 54.2, reflecting relatively lengthy times to complete each respective component.

Trading across Borders

Doing Business records the time and costs associated with the logistical process of exporting and importing goods. It measures the time and cost (excluding tariffs) associated with three sets of procedures (only the first two are important here) – documentary compliance, border compliance and domestic transport – within the overall process of exporting or importing a shipment of good.

Out of a possible score of 100, Guyana scored 58.3 yet ranked 151 out of 190 countries. This is because of comparatively excessive times and costs of border compliance and documentary compliance for both import and export.

Documentary compliance includes things such as obtaining, preparing and submitting documents during transport, clearance, inspections and port handling in origin economy; obtaining, preparing and submitting documents required by destination economy; and covers all documents required by law and in practice, including electronic submissions of information.

Some of these documents include the Bill of Lading, Commercial invoice Customs import/export declaration, Packing list, Phytosanitary certificate, SOLAS certificate, Export license, Cargo release order, Police clearance, Tax certificate.

Border compliance includes: customs clearance and inspections; inspections by other agencies (if applied to more than 20% of shipments); and handling and inspections that take place at the economy’s port or border.

When compared to LAC countries’ average, Guyana stands well. There is still much room for improvement based on the indicators measured, especially with the time required and complexity of documentary compliance for both importing and exporting into Guyana.

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