The International Monetary Fund (IMF) is of the firm view that the local authorities should take all necessary steps to remove discretionary income tax holidays for mining and petroleum companies.
In one of its most recent reports issued to the Coalition administration, the financial institution outlined that Guyana’s Income Tax Act allows for exemptions. It said that for new mining investments, the tax holiday may be provided for up to 10 years. As an additional benefit, any tax depreciation allowances are deferred until the end of the tax holiday period. The IMF said it is not fully clear whether any tax holidays have been provided under the existing Mineral Agreements, although the draft Minerals Policy gives the impression that at least two mines enjoy these benefits.
Further to this, the IMF said that tax holidays are likely not to be effective as most mines are still recovering the initial investment during the period when tax holidays apply. It said moreover that tax depreciation allowances will extend the period in which there is no tax payable. Considering this, the Fund said that the exemptions provide a windfall to the investors during a period when the initial investment most likely has been recovered.
On this premise, the IMF said that the process for allowing exemptions needs to be strengthened with a key gatekeeper role played by the Ministry of Finance.