Guyana - Politics, government, and taxation

The original inhabitants of what is now Guyana were the Arawaks. They were displaced from the area by the Caribs, warriors who dominated the region before moving on. Both the Arawaks and the Caribs were nomadic, moved primarily in clans of 15-20 people, and lived by fishing and hunting.

Attracted by the legend of El Dorado—a fabled city that was thought to be full of gold and precious jewels— the Dutch built the first fort in present-day Guyana in 1616. They divided Guyana into 3 colonies: Demerara, Berbice, and Essequibo. The territory was captured by Britain in 1796 and renamed British Guiana.

Beginning in 1950, an anti-colonial struggle was spearheaded by the People's Progressive Party (PPP), led by Cheddi Jagan and Forbes Burnham. After the success of the PPP in the elections of 1953 and the introduction of a socialist program, however, the British government suspended the constitution and sent troops into Georgetown. Some members of the PPP were detained or confined to their homes. By the time internal autonomy was granted in 1961, Burnham had split with Jagan to form a more moderate People's National Congress (PNC). After years of struggle and violence, Britain recognized Guyana as an independent state within the British Commonwealth on 26 May 1966. Burnham served as the first prime minister.

On 23 February 1970, Guyana became the first ever Cooperative Republic, with Arthur Chung as its first non-executive president. In October 1980, Prime Minister Forbes Burnham declared himself the executive president. About 2 months later his party, the PNC, won a large majority of votes in the National Assembly election, which was widely condemned as being rigged. It was declared that Burnham was duly elected as president.

When Burnham died in August 1985, Prime Minister Desmond Hoyte succeeded him as president. Like his predecessor, Hoyte was declared duly elected when the PNC gained a large majority during the 1985 election for the National Assembly, although the results were again disputed. However, desperate economic circumstances forced Guyana to seek external aid that came with the condition of restoring credible elections. Cheddi Jagan finally gained power in 1992. Following his death in March 1997, his wife, Janet Jagan, was sworn in as president on 24 December 1997. When Janet Jagan resigned in 1999, Bharrat Jagdeo assumed the presidency.

In 1980 a new constitution was adopted. The constitution established an executive president and a National Assembly, which consists of 53 elected members and 12 members appointed by local government councils. Elections for 5-year terms are held under a single list system of proportional representation , with the whole of the country forming one electoral area and each voter casting a vote for a party list of candidates. Guyana has 10 administrative regions.

The tax system in Guyana is poorly administered, and the level of collection is far below the system's potential. Evasion, avoidance, and corruption are rampant. For example, in 1991 tax revenue from the private sector amounted to only 21 percent of the GDP. Many firms enjoy overly generous tax and tariff holidays as part of the government's attempt to encourage new investment through incentives. Corrupt revenue officials issue lower tax demands as the result of bribery.

Sales taxes are very high for some products (up to 150 percent), though other sectors, such as services, are ignored entirely. Fees charged for public services, which often have not been adjusted for inflation, are very low or simply remain uncollected or are non-existent. The present tariff structure remains protective. While it follows the CARICOM structure, the top tariff rate of 45 percent is high by present standards in Latin America. Many other Latin American countries have reduced tariffs to a maximum of 20 percent. It has been estimated that the system of tariff protection and fiscal incentives cost the country G$150,000 for every job created. However, the Economic Recovery Program (ERP) launched in 1988 began to reverse these policies. It eliminated import licensing, reduced tariffs, and began an overhaul of the entire tax system. Corporate income tax is relatively high at 45 percent. The tax rate on capital gains is 20 percent, and interest and dividends paid by non-resident companies are subject to a 15 percent withholding tax.