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Time to “go after” tax evaders harder

Acknowledging “significant improvement over the past few years” in tax collection, it is time to take a closer look at the system for “early signals,” International Monetary Fund (IMF) mission chief for Grenada Huidan Lin told reporters at a press briefing on May 26.

She pointed to the fact that the IMF has “been engaging” the Grenadian authorities about tax collection for several years.  While collection during the past year reflects the “nominal growth” in Gross Domestic Product (GDP), there is still room for “significant improvement.”

She advised the authorities to “utilise some indicators to see whether there might be some risks in the tax collection system by comparing the collection against the local activity” such as applications for imports. These can be used to observe “early signals” of non-compliance by taxpayers and “go after them,” she said.

The two-week mission, which ended last Friday (May 26), recommends that government take “a holistic look at the tax incentive framework to see, to revisit the rationale for existing costs and benefits to update to where savings could be made. Other efforts on the revenue side could include enforcing the tax administration more forcefully so that all the tax that can be collected should be collected,” she noted.

The most recent tax amnesty that will end on December 31, 2023 “should be the last one,” Lin said, adding that she has been given the assurance by the Prime Minister Hon Dickon Mitchell that it was the last one.

“It should be deep in people’s minds and people who are owing tax to the government, this is the last one,” she said, adding “government will have to illustrate a stronger enforcement of collecting the tax.”

In presenting its preliminary findings on the state of the economy, the team suggested measures to enhance the overall fiscal framework. This includes improving the effectiveness and targeting of social assistance programmes through determining eligibility, strengthening the central beneficiary management system and moving to cashless payments. Any saving as a result should be used to increase transfers to the vulnerable.

Efficiency is possible with an update to the tax incentive framework and increased risk-based internal auditing of the customs administration, the team observed.

Complementing the government on establishing a Ministry of Mobilisation, Implementation and Transformation, she said the focus should be on improving the implementation rate of projects, increasing project oversight, and strengthening the transparency and accountability of the procurement system.

Turning to the role of financial institutions in the economy, Lin noted the “wide membership” of the credit union movement and the fact that for some people, it is easier to obtain a loan from a credit union rather than a bank. She expressed concern that credit unions have non-performing loans, for which some have assets as collateral and some do not, that have risen to 8.4% of total loans.

“We recognise that in this market it is difficult to re-evaluate the value of collateral and, also seizing the collateral, repossessing the collateral,” she said, advising credit unions to assess their credit risk management practises “to make sure they know the history of their borrowers.”

Such a strategy would improve the health of the credit union system with help from the regulator, which is the Eastern Caribbean Central Bank.

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