A. Background

1. In August 2022, a FAD technical assistance mission assessed Suriname’s state of readiness to introduce the VAT. The mission provided advice on actions needed for the authorities’ smooth implementation on January 1, 2023. This follow-up mission is to evaluate the launch’s effectiveness and its administration in the first 12 months of operation and to give advice on improving the efficiency and effectiveness of VAT administration.

2. As part of their economic and fiscal reform program, Suriname implemented a VAT on January 1, 2023, replacing the Sales Tax. To address the many years of systemic fiscal and external imbalances, Suriname requested a 36-month arrangement under the Fund’s Extended Fund Facility (EFF) program, which included steps to restore fiscal sustainability and strengthen fiscal management—having a more efficient revenue administration, improving revenue mobilization with the transition from a sales tax to VAT as a key component¹.

3. An assessment of the Directorate of Taxation (DoTC) using the Tax Administration Diagnostic Assessment Tool (TADAT), conducted in October 2023, found substantial weaknesses across all nine performance outcome areas assessed. The root causes of the weaknesses emanate from at least four areas: (i) weak institutional and organizational arrangements, with core taxes being administered by five departments; (ii) multiple IT systems led to operational silos and inefficiencies; (iii) outdated legislations, with a principal collection Act of 1869; and (iv) governance issues—accountability and transparency framework is weak, notably—no internal assurance mechanism, limited external oversight, annual plans and reports not being published. The assessment found that the VAT performed poorly, especially given that it is a new tax.

B. Fiscal Review

4. Tax revenue collected by the DoTC was approximately 3.0 percent of GDP, and an outturn of 94.4 percent of revenue projected for 2023. Both direct and indirect taxes underperformed. VAT, while being the largest contributor to tax revenue (21.4 percent of total collection), also underperformed at 95.4 percent.

5. The DoTC is expected to collect SRD 26.5 billion for 2024. This is 33.5 percent above the 2023 collection. VAT is projected at SRD 5.6 billion, 30.7 percent above 2023’s collection, and to contribute 20.9 percent of total expected revenue (Table 2).

^{Table 2.}

DoTC 2023 Revenue Performance

Source: Compiled by the mission from data provided by DoTC.,

^{Table 2.}

DoTC 2023 Revenue Performance

		2023 Projection	2023 Collection	2023 Performance	2024 Projection	2024 adj.
		SRD million		%	SRD million	%
Direct Taxes		10,697.0	9,910.6	92.6	11,918.6	20.3
Indirect Taxes		10,358.2	9,967.5	96.2	14,628.6	46.8
	of which VAT	4,450.9	4,247.9	95.4	5,550.0	30.7
Total Tax Revenue		21,055.1	19,878.1	94.4	26,547.2	33.5
	VAT % Total Rev.,	21.1	21.4		20.9

Source: Compiled by the mission from data provided by DoTC.,

View Table

^{Table 2.}

DoTC 2023 Revenue Performance

		2023 Projection	2023 Collection	2023 Performance	2024 Projection	2024 adj.
		SRD million		%	SRD million	%
Direct Taxes		10,697.0	9,910.6	92.6	11,918.6	20.3
Indirect Taxes		10,358.2	9,967.5	96.2	14,628.6	46.8
	of which VAT	4,450.9	4,247.9	95.4	5,550.0	30.7
Total Tax Revenue		21,055.1	19,878.1	94.4	26,547.2	33.5
	VAT % Total Rev.,	21.1	21.4		20.9

Source: Compiled by the mission from data provided by DoTC.,

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VAT Revenue Performance

Citation: Technical Assistance Reports 2024, 042; 10.5089/9798400276477.019.A001

Source: Compiled by the mission from data provided by DoTC.

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7. VAT paid on the importation of goods was 62.2 percent of gross collection and 63.3 percent of net collection. November 2023 reported the largest gross collection—due to increased volume of imports, representing 75.6 percent of gross VAT collected, or 13.6 percent VAT collected at Customs. VAT collected on domestic operations was 37.8 of gross collection and 39.7 percent of net collection. Of note, VAT credit/refund claims amounted to SRD 989.4 million. The VAT refund process is discussed in Sections III and IV.

8. VAT appears to perform at the same level as Sales Tax collection for 2022. Notwithstanding that Net VAT is 55.9 percent above Sales Tax collection, both came out at approximately 3.0 percent of GDP. However, if more refunds were processed and paid in a timely manner, the VAT would have under-performed relative to the Sales tax.

9. Gross VAT revenue steadily increased quarter-over-quarter. The fourth quarter (Q4) recorded the largest amount collected, SRD 1.5 billion or 33.2 percent of total collection, followed by the third quarter with 26.1 percent. VAT on imports is responsible for the larger share of collection, being 65.5 percent of the Q4 collections. This collection trend is in line with expectations.

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VAT Revenue Collection

Citation: Technical Assistance Reports 2024, 042; 10.5089/9798400276477.019.A001

Source: Compiled by the mission from data provided by DoTC.

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10. The weaker-than-expected collection of VAT revenue can be attributed to several factors. Factors such as: (i) weak and under-resourced implementation program; (ii) lack of a targeted taxpayer advisory program that prepared VAT registrants for the launch of the VAT (e.g., how to account for VAT transactions) and limited general taxpayer awareness/education program; and (iii) late amendments to the VAT Act. Chapter III discusses the weak performance of the administration in more detail. However, this can be remedied if the authorities take steps to address the fundamental weaknesses by strengthening organizational arrangements, automating most business processes, building technical capacity, and strengthening the legal framework.

A. Overall Status

11. The 2022 FAD mission provided a comprehensive set of recommendations aimed at facilitating a successful implementation of VAT, but they have largely not been followed. That mission assessed the authorities’ degree of readiness to introduce VAT on January 1^st, 2023, and provided advice on activities with timelines to be undertaken for an effective. The mission’s report indicated that, with the implementation of only four months after the passage of the VAT Act, the launch would be challenging as several critical factors needed for a successful launch were not in place. Notwithstanding the many challenges outlined, the authorities indicated that they were committed to a January 2023 launch.

12. The DoTC was not sufficiently prepared to effectively administer VAT by the time it was launched. To mitigate implementation risks, the mission advised that a progress review of the implementation project should have been undertaken by mid-October 2022 to determine if the planned launch date was feasible. The DoTC indicated that the review was not done. The DoTC, therefore, did not reach the expected level of preparedness to ensure an effective launch of the VAT.

13. The gaps in the level of preparedness were observed in several areas. Some of the areas are: (i) the steering committee was not reconstituted, the VAT implementation team (VIT) was not fulltime, and the project was not fully funded and staffed; (ii) most Decrees/Orders were not finalized; (iii) staff did not receive the required training to ensure adequate understanding of the VAT legislation; (iv) tax and customs business processes were not fully strengthened to address previously identified gaps; (v) the full suite of IT (Information Technology) solutions required to support VAT were not deployed; (vi) registration of potential VAT registrants started later than expected; (vii) a VAT advisory program was not developed; and (viii) taxpayers and traders did not receive sufficient awareness of VAT to ready for the January 1^st launch.

14. The inadequacy of training provided to DoTC staff represents a significant challenge. Insufficient knowledge and skills within the DoTC not only impede the smooth functioning of the VAT system but also contribute to confusion and resistance among taxpayers and traders. The lack of a well-structured and executed stakeholder consultation and education program further intensified these challenges, leaving taxpayers grappling with the new legislative framework and fostering an environment of non-compliance.

15. Changes in the policy framework during the time of implementation created uncertainty and delays. The VAT implementation has been hampered by changes in the policy framework during the critical phase of execution. The absence of a stable and predictable policy environment creates uncertainty for both the DoTC and taxpayers/traders, hindering effective management of the VAT. Businesses find it challenging to adapt and comply with changing legislation, while the DoTC struggles to maintain control and coherence in its administration. These inconsistencies had a negative impact on revenue collection and the level of compliance. The impact on the level of preparedness by the DoTC and taxpayers is clearly revealed in the first 12 months of VAT. This is further discussed in Section III of this report.

16. The 2022 FAD recommendations, designed to guide the authorities through seamless implementation, remain largely unaddressed. The challenges faced in implementing the suggested timelines and activities outlined by the FAD mission have put the VAT system’s success in jeopardy. Appendix 1 provides an overview of the recommendations and the status as of January 2024, underscoring the urgent need for a reassessment of the implementation strategy. Addressing these challenges is imperative to build confidence in the VAT system. Table 3 set summarizes the status of the key recommendations.

^{Table 3.}

Key Recommendations for launching the VAT

^{Table 3.}

Key Recommendations for launching the VAT

Critical Areas – Recommendations			Status
Strengthen the implementation of project management to ensure timely delivery of outcomes by re-establishing the steering committee and establishing a full-time VIT.
An approved implementation plan and key resources need to be put in place.
A new tax administration information system is being developed, prioritizing the VAT-related modules.
Advisory visits should be mobilized to begin detailed education of the newly registered VAT registrants and potential registrants.			Remain relevant
The authorities should consider whether VAT should be administered under the current Sales Tax regime. The preferred view is to use a reformed LTU to administer the VAT until the OTA undertakes its reform program.			Remain relevant
Critical to the operations of Customs is procuring a new training server and finalizing the list of zero-rated/exempted goods.
Develop the supporting Orders/Decree/ Regulation & List of exemptions and zero-rated with the appropriate tariff codes.
Key	Achieved	Partially achieved	Not achieved

View Table

^{Table 3.}

Key Recommendations for launching the VAT

Critical Areas – Recommendations			Status
Strengthen the implementation of project management to ensure timely delivery of outcomes by re-establishing the steering committee and establishing a full-time VIT.
An approved implementation plan and key resources need to be put in place.
A new tax administration information system is being developed, prioritizing the VAT-related modules.
Advisory visits should be mobilized to begin detailed education of the newly registered VAT registrants and potential registrants.			Remain relevant
The authorities should consider whether VAT should be administered under the current Sales Tax regime. The preferred view is to use a reformed LTU to administer the VAT until the OTA undertakes its reform program.			Remain relevant
Critical to the operations of Customs is procuring a new training server and finalizing the list of zero-rated/exempted goods.
Develop the supporting Orders/Decree/ Regulation & List of exemptions and zero-rated with the appropriate tariff codes.
Key	Achieved	Partially achieved	Not achieved

B. Views of the private sector

The mission met and held fruitful discussions with private sector representatives. Representatives from different organizations were invited to share their views. The invitation to the meeting stated the intention of obtaining the views of external parties and stakeholders that interact with the DoTC. The participants were asked to be prepared to hold discussions on: (i) views on the implementation and the administration of the VAT; (ii) the extent to which the DoTC is providing information to taxpayers/traders to fulfill their VAT obligations; (iii) how stakeholder groups can assist the DoTC to improve it service delivery and operations; (iv) the timeliness of payment of refunds; (v) the accessibility and quality of interaction with the staff; (vi) how the DoTC can improve its operations, increase compliance and collection; and (vii) challenges to complying with requirements and legislations. Issues raised by representatives from the private sector are shown in Box 1 below.

Regular consultations between the DoTC and stakeholders are imperative to improve trust, confidence, and compliance with VAT. Regular consultations will allow stakeholders to voice concerns regarding specific issues related to the design and operations of the VAT in Suriname. This will enable the DoTC to focus on the development and implementation of educational materials and campaigns to address specific issues raised. It will also provide an opportunity to understand where capacity for the building of DoTC staff is needed.

A. Legislative Framework and Challenges

17. The VAT Act implemented January 1, 2023, does not adhere to international good practice. For ease of administration and compliance, the general rule for the imposition of a VAT is to have a single positive rate, zero rate for export, a broad taxable base with few exemptions, and a relatively high VAT threshold². Suriname’s implemented a multiple-rate regime—standard rate of 10 percent; 5 percent applicable to international medical insurance and fuel; 25 percent applicable to a defined category of goods; zero percent on a wide range of items such as food—in addition to an extended list of exemptions. The multiple rates, large lists of exemptions, and zero-rated goods and services increase administrative complexities and compliance. The VAT threshold of SRD 1 million is among the lowest in the region.

18. Most of the Orders required to provide guidance in the administration of the VAT Act were not developed. Six Orders have been developed to date but have not been published. The Act speaks to over 12 Orders. Not developing all the required rules has created uncertainty and thereby negatively impacted the administration of the VAT and taxpayer compliance. The Orders are to provide guidance and clarity on how the respective provisions are to be administered and adhered to by taxpayers.

19. The Act was amended twice since its enactment in August 2022. The first amendment, on December 30^th, 2022, saw the shifting of most exempted products to zero-rated and zero-rated items to exemption. This amendment included the imposition of a 5 percent rate. The second amendment was made in September 2023. This includes transferring most zero-rated items back to exemption, bringing zero-rating somewhat more in line with good practice. However, Annex 1 of the Act (zero-rating) makes provisions for certain persons to acquire goods and services without the payment of VAT, creating administrative complexities.

20. Last-minute changes in the policy framework in December 2022 created uncertainty and delays. Given the timing of this amendment, taxpayers would not have been given sufficient notice to prepare—recode their accounting systems, cash registers, and Point-of-Sale systems to indicate items that now attracted zero percent. The tax administration was not sufficiently prepared to provide information to taxpayers and to the wider public (including the impact on pricing and how to accurately account for VAT). Customs didn’t have the time to recode the ASYCUDA system. In addition, this amendment caused an increase in refund claims and a reduction in expected VAT revenue.

21. The amendments in September 2023 were aimed at protecting and increasing VAT revenues instead of simplifying the system. The implementation of these amendments by the authorities mirrored the December 2022 approach—that is, insufficient time was given to taxpayers to prepare their systems to accommodate the changes. With these changes, taxpayers need to be guided on how to account for VAT.

22. The Act provides for governmental entities and special designated persons to acquire taxable goods and services at zero percent³ (VAT-free). This forces suppliers to (i) distinguish between regular/commercial customers and VAT-free customers, (ii) develop procedures for applying the appropriate tax rate and (iii) account for the supply. The array of goods and services purchased by governments is large and includes many dual-use goods. For this reason, there is a high risk that some goods can be purchased VAT-free for personal use. The current regime of supplying a one-off letter to the specified entities, indicating exemption is open to misuse. Currently, there is no mechanism in place to ensure that supplies acquired are used for the intended purpose. This system creates both administrative and compliance challenges and risk to the revenue. An Order should be developed, putting a mechanism in place to prevent abuse, and the OTA should collect information as to the supplier, purchaser, the nature of and value of the supply.

23. A common legal framework for the administration of all taxes is urgently needed. The authorities plan to enact a General Tax Act (GTA) in 2024. However, this has been in draft for an extended period. The intention is for the GTA to operate as a tax administration procedure act (TAPA). A TAPA is a unified tax procedure law, which groups into a single self-contained law all legal provisions relevant to the administration of tax liabilities and recovery of tax imposed under the main tax. This ensures that a proper legal framework, for tax administration is in place, that provides an appropriate balance between the rights of taxpayers and the powers of the Authority laws. Thus, the objective of the GTA is to harmonize the administrative provisions of several of Suriname’s tax Acts and would replace the 1896 Collection Act and the Fiscal Identification Number Act. To effectively administer VAT, if the GTA will not be enacted in 2024, consideration should be given for amendments to be made to the VAT Act. (e.g., mandatory use of a single FIN), expand enforcement measures, and remove the link with the 1896 Collection Act.

B. Organizational arrangements and staffing issues

24. The authorities did not adopt the organizational model used by several countries in the Caribbean. That is, establishing a dedicated unit/department to administer the VAT for at least two years and then integrating it within the main tax administration. VAT is being administered with the same institutional and organizational settings as the sales tax.

25. Organizational arrangements to administer the VAT are fragmented, impacting the successful implementation of the VAT, and must be consolidated under the Inspectorate Sales Tax. The VAT Implementation Team in charge of the VAT launch is no longer in place. The Inspectorate Sales Tax has responsibility for registering VAT taxpayers, receiving/processing VAT returns, monitoring VAT filing compliance, auditing of non-large taxpayers, and investigating accuracy of VAT refund claims. The Inspectorate Direct Taxes has the LTU reporting to it, which is primarily responsible for detecting inaccurate reporting of large taxpayers. The Collector of Direct Taxes is responsible for VAT collections, including collection of VAT arrears and payment of VAT refunds. VAT revenue performance and monitoring of VAT compliance could best be achieved if one organizational department has end-to-end responsibilities for all core tax administration functions and management of large taxpayers. Table 4 lists the departments and responsibilities in relation the administration of VAT.

^{Table 4.}

Departments Administering VAT

Source: Compiled by mission team.

^{Table 4.}

Departments Administering VAT

Office/Department	Code	Business Processes Owners
Directorate of Taxes	HQ	General policy & the LTU
Inspectorate of Sales Tax (VAT)	IOB	Registration, filing, assessing, audit, objection, refund approval
Direct Tax Receipt Office	ODB	Collection of Sales tax and VAT; arrears management and enforced collection.
Import Duties & Excise/Customs Inspectorate	IIA	Levy VAT on importation of goods, assessing import values
Receipt Office Excise and Imports	OIA	Collection of VAT on importation of goods

Source: Compiled by mission team.

View Table

^{Table 4.}

Departments Administering VAT

Office/Department	Code	Business Processes Owners
Directorate of Taxes	HQ	General policy & the LTU
Inspectorate of Sales Tax (VAT)	IOB	Registration, filing, assessing, audit, objection, refund approval
Direct Tax Receipt Office	ODB	Collection of Sales tax and VAT; arrears management and enforced collection.
Import Duties & Excise/Customs Inspectorate	IIA	Levy VAT on importation of goods, assessing import values
Receipt Office Excise and Imports	OIA	Collection of VAT on importation of goods

Source: Compiled by mission team.

26. Human resources required to effectively administer the VAT has not been fully identified and DoTC management and staff have raised concern regarding the lack of sufficient resources to administer the VAT. There is a need to have staff to administer all aspects of the VAT (e.g., staff required to register/educate and provide needed services to all VAT registrants, data analysis staff that could identify key VAT compliance risks and treatment strategies, staff to monitor filing and payment compliance, audit staff to monitor inaccurate reporting of both large and non-large taxpayers). However, at this stage of VAT implementation, it is not clear how many staff are needed to administer the VAT as there has not been an in-depth analysis of any benefits coming from automation (e.g. taxpayers registering online, returns being submitted online), review to determine if all core business process have been streamlined (e.g. full automation of the assessment process and risk-based VAT refund process that will reduce the audit resources required). Notwithstanding, consider increasing the number of staff, in the Inspectorate of Sales Tax from the pool of new hires.

27. While some capacity building of OTA staff was provided before the launch of VAT and during 2023, the training is insufficient to ensure effective administration of the VAT. An in-depth understanding of the VAT law and the design/mechanics of VAT is not in place. For example, staff responsible for registering taxpayers and responding to taxpayer VAT inquiries received some VAT training prior to the launch. However, they faced ongoing challenges during 2023 to provide certainty to taxpayer questions and would frequently request support from management of the Inspectorate Sales Tax. In addition, while some auditors received VAT training prior to the launch and a four-day refresher training in 2023, there is concern that staff have not acquired the required knowledge to effectively detect inaccurate reporting of VAT. It is important to note that the OTA lacks standard operating procedures for most core tax administration functions, which could have been used as part of a training program to fully operationalize the VAT. Additional program/project management and change management skills need to be developed to ensure effective administration of the VAT and management of a comprehensive tax and customs administration reform program. Priority needs to be given to re-establishing a small team of core experts that will be trained on all aspects of VAT and a train-the-trainers program developed to build capacity across the OTA.

28. The DoTC continues to strive to implement a broad range of tax/customs administration reforms that will build a stronger foundation for all core tax/customs administration functions. Emphasis should be placed on modernizing and stabilizing core tax/customs administration functions relating to VAT prior to the establishment of possible broader DoTC organizational reforms.

C. Taxpayer registration and the Use of a Single TIN

29. There is a concern that not all required taxpayers have been registered for VAT. On January 1, 2023, approximately 970 taxpayers were registered for VAT; an additional 1,800 taxpayers registered during January, and Suriname reached approximately 4,000 by the end of 2023.This fell short of the initial target of 5,000. The initial plan was to use available data to identify potential VAT registrants prior to the launch in January 2023; however, given the concerns related to accuracy and reliability of available data, the decision was made to launch a public awareness campaign that informed taxpayers of their obligation to register if they meet the VAT registration threshold. The Inspectorate of Sales Tax has taken steps, during 2023, to increase the number of VAT registrants. Given the low VAT threshold, the general view is that the number of registrants is low.

30. All taxpayers that meet the VAT threshold must register and VAT returns/payments should be made according to the legislative prescribed deadline. A sound VAT system requires that all taxpayers register, file, and pay VAT. The first task of any tax administration is to facilitate compliance, ensuring that those who should be in the system are in the system, and that they comply with the rules. To do so taxpayers must be found. If they are required to register, the registration process should be as easy as possible⁴.

31. Measures are needed to detect unregistered VAT taxpayers. Priority should be given to using third-party data to identify taxpayers who failed to register for VAT. The adoption and implementation of the FIN will facilitate cross-checking of data to identify unregistered VAT taxpayers. It will take time before all departments and agencies begin to use the single FIN; however, as a first step, the OTA should provide Customs with the FIN for all taxpayers registered for VAT. Customs should require all importers to use the FIN, facilitating data sharing between the two departments.

32. Registration for VAT is done electronically. However, currently the online facility does not allow VAT registrants to update their registration details or to view taxpayer account details.

33. The taxpayer register is not integrated with any other national business registries. Taxpayers provide all information and evidence necessary for registration by entering data via the Web portal and attach required documentary evidence. However, return data now available for one year indicates many taxpayers may have been assigned to the wrong sectors. Consideration should be given for the OTA to access the Chamber of Commerce register, which can help check taxpayers’ nature of business.

34. The delays in implementing a single IT system that covers all core tax types presents a substantial risk to monitoring compliance for VAT and all other core tax types. The OTA has two separate taxpayer registration databases, which impacts the accuracy and reliability of the overall OTA taxpayer register, as measures will need to be put in place to keep both taxpayer registers in sync as taxpayers amend their registration details. This also requires taxpayers to use multiple TINs, one for direct taxes, one for VAT, and one for any importation/exportation with customs.

35. Taxpayers are segmented into large, medium, and small taxpayers using taxpayers’ registration data. Current taxpayer segmentation policies have been based on the estimated annual turnover provided by taxpayers. However, this distorts the measurement of compliance across the different taxpayer segments as they are not yet based on actual annual turnover declared in the tax returns. Based on data submitted by the authorities, there are 377 large registrants, 9.3 percent of total registrants.

36. Segmenting taxpayers involves dividing taxpayers into different groups based on various characteristics. Income level, compliance behavior, industry, business complexity, asset value and demographic factors, are some of the criteria used in segmenting the taxpayer population. Segmentation allows tax administrations to develop tailored programs that enhances compliance, improves service delivery, and ultimately contributes to a more efficient and equitable tax system. With more than one full year of taxpayers VAT declarations, a segmentation exercise should be undertaken by July 2024.

D. Taxpayer Service and Public Awareness Program

44. The DoTC established a small Taxpayer Services Division; however, it has not yet reached the desired level of maturity. This was established with a staff of seven and was expected to assist taxpayers to register for VAT, assist taxpayers to understand how to file VAT returns electronically and make required VAT payments, and to respond to a wide range of VAT queries. Prior to the launch of the VAT and during the first few months of VAT implementation, taxpayers chose to contact staff in this division (e.g., in-person visits, phone calls or email communication); however, since the staff did not have sufficient knowledge to fully respond to VAT queries, queries were directed to other areas (e.g., direct contact with DoTC senior management). The establishment of such a division is an important milestone for the DoTC. However, a more modern taxpayer services strategy (e.g., shifting focus to more outreach programs to addressing service interventions based on identified compliance risks), and service standards and standard operating procedures will need to be developed before the taxpayer services function reaches the next level of maturity. Further investment in this area is critical, as improved services can be a more efficient means of fostering voluntary compliance and contribute to improved revenue performance.

45. A public awareness campaign was developed for the launch of the VAT and to operationalize the VAT in 2023; however, additional work is needed to ensure full understanding of the VAT. The following summarizes key actions taken: (i) a video was developed to build awareness of the VAT; (ii) a help desk was established to assist taxpayers to understand how to register, file and pay VAT; (iii) a range of channels were used to deliver the information and products (e.g., radio, social media, newspaper, quick response (QR) codes, website, phone, portal, and face-to-face meetings with stakeholders); and (iv) several guides for VAT registration were produced. Additional guides/educational materials will need to be developed moving forward to cover key areas (e.g., the process for completing VAT returns, an overview of the VAT refund process, VAT arrears management guide, and guides targeted to the needs of specific economic sectors).

46. VAT registrants may not be fully aware of how to comply with VAT. The proposed launch of an advisory program that ensures VAT registrants are fully aware of the design and mechanics of VAT did not take place as recommended. Feedback received from the stakeholders’ meetings confirmed that additional education and guidance from such a program would have provided greater certainty and clarity regarding VAT implementation. The authorities should develop targeted advisory programs, as this program is still needed. The issuing of rulings/Orders can also provide clarity in some provisions within the Act.

47. A taxpayer advisory program is still relevant. However, staff of the DoTC will need to be trained in VAT legislative framework, audit techniques, general business processes, and internal control. In the interim, senior management, supported by LTU staff, should provide tailored information to taxpayers, targeting large taxpayers and complex sectors. An advisory program is one of the principal tools used to inform and educate potential and registered taxpayers. The advisory program provides legal and administrative procedures tailored to the operations of specific business entities. In addition, the advisory program collects specific technical and operational information and allows for basic data about the taxpayer’s business, level of VAT knowledge, and compliance attitude to be captured by the administration.

E. Filing and Assessment

48. All VAT returns are required to be submitted electronically. This is a positive move by the authorities—ensuring that there is no mechanism for taxpayers to file paper-based returns. Kiosks were put in place to guide taxpayers on how to file electronically.

49. On-time filing compliance of VAT returns is low for all taxpayer segments, and a substantial number of taxpayers have not filed VAT returns. There are several reasons for low VAT filing compliance, which includes lack of awareness of how to complete and file VAT returns, delays in registering taxpayers prior to the launch date⁵, and lack of timely filing enforcement by the OTA. The following is a summary of filing compliance levels:

• Average VAT on-time filing for large taxpayers in 2023 was approximately 26.6 percent and 23.6 percent for non-large taxpayers. Late filing of VAT returns will have a negative impact on timely receipt of VAT collections as taxpayers that chose not to file on time also do not pay on time. Timely receipt of VAT collections is critical.

• Approximately 18,000 expected VAT returns were not filed in 2023, including 1,800 VAT returns from large taxpayers. This represents a substantial risk to VAT revenue performance as those taxpayers who have chosen not to file also opted not to pay VAT. In addition, when a VAT return is not filed, this eliminates the ability to identify the taxpayer’s liability, detect inaccurate reporting, and could distort accurate reporting of the stock of VAT arrears.

50. Monitoring of on-time and non-filing of VAT returns is ineffective and needs to be strengthened as the data shows filing compliance remains the same across all 12 months. The following highlights key reasons: (i) the Inspectorate Sales Tax does not have a dedicated team that has accountability and responsibility for monitoring filing compliance; (ii) the Inspectorate Sales Tax does not have standard operating procedures that outline all possible actions to be taken to increase on-time filing of VAT returns and for securing returns that have not been filed; and (iii) the IT compliance module that detects late filing and fully supports enforcements actions was only delivered in July 2023.

51. Measures are needed to strengthen VAT filing compliance. A small compliance team should be established to secure current missing VAT returns, ensure timely follow-up on taxpayers who have failed to file, and timely assessed taxpayers have not filed. This should also apply ensure timely payments. As a starting point, the team should prioritize improving filing/payment compliance of large taxpayers, given their importance. In addition to sending the traditional filing reminder and warning letters, the compliance officers should make direct contact with the taxpayer to find out the reasons for not filing VAT returns on time. If the taxpayer needs further education or assistance on how to prepare the returns, this should be provided. If the taxpayer chooses not to file the required VAT returns, the team should generate an estimated assessment. The DoTC should consider if technical assistance is needed to prepare filing and payment standard operating procedures and if training is needed to build capacity. Regarding payment, the team should work with the Inspectorate Collections to determine if any VAT payments were placed in the suspense account and changes made to post the unidentified payment to the right taxpayer account.

F. Payment and arrears management

52. Taxpayers pay VAT electronically through their banks; however, the payment process used to secure and post payments into the new IT system have not been strengthened along the lines recommended during 2022 FAD mission. Some VAT payments cannot be posted to the taxpayers’ account and are placed in one of two suspense accounts—due to incorrect/no FIN, no tax period stated, or no tax type indicated. This has implications as to the accuracy of taxpayers’ accounts, the level of VAT arrears and refunds, and, more importantly, the reporting of tax revenue per tax type. Currently, taxpayers do not have the option to pay VAT online directly to the OTA. Implementation of this solution would facilitate the timely and accurate recording of VAT payments.

53. Not all 2023 VAT liabilities have been posted to taxpayers’ account ledgers, creating a risk to the accuracy revenue data and taxpayers’ accounts. VAT return data provided to the mission by OTA indicates that SRD 2.7 billion was declared as payable. Most of these declarations are yet to be posted to the respective taxpayers’ accounts—due primarily to the authorities focusing on the processing of VAT refund claims, and several declarations found with data issues. This poses significant risk, where taxpayers have made payments, and the corresponding liability is yet to be recognized in the system.

54. The OTA does not have a complete and accurate reporting of the stock of arrears. The following are the key reasons for this: (i) failure to post reported VAT liabilities to taxpayers’ accounts and not being able to track VAT refunds paid to taxpayers who may have used credits to offset payables for subsequent periods; (ii) the OTA cannot consolidate the amount of stock of arrears for all core tax taxes, as currently there are two independent IT systems; and (iii) taxpayers who have failed to file VAT returns have not been assessed; and (iv) limited capacity and system to detect inaccurate reporting, as the OTA audit program has been limited to VAT refund audits. There are no standard operating procedures to guide tax officials to use the full suite of enforcement actions to collect arrears and the current IT system does not fully support the management of VAT arrears.

55. It is estimated that the amount of VAT arrears could be at least SRD 1.0 billion. Table 5 shows the total payable reported on VAT declarations and payments made to the authorities. The computed balance does not include penalty or interest for late filing or payment, or audit assessments.

^{Table 5:}

VAT Payable and Paid (SRD million)

Source: Compiled by the mission from data provided by DoTC.

^{Table 5:}

VAT Payable and Paid (SRD million)

Domestic VAT	Value
VAT Payble	2,731.8
less Collected paid	1,685.8
Balance	1,046.0

Source: Compiled by the mission from data provided by DoTC.

View Table

^{Table 5:}

VAT Payable and Paid (SRD million)

Domestic VAT	Value
VAT Payble	2,731.8
less Collected paid	1,685.8
Balance	1,046.0

Source: Compiled by the mission from data provided by DoTC.

56. Ensure timely posting of all VAT returns to record taxpayers’ liabilities and the overall status of each taxpayer account. This is to be done before the end of the month following the due date for filing, ideally within 24 hours of filing. Posting liabilities promptly ensures that the taxpayers’ accounts accurately reflect the current position of each taxpayer, provides management with information on the amount of tax due, level of tax arrears, refund claims and due, assessments, facilitates timely off-setting of refunds against liabilities and level of penalties and interests imposed. This is also important to taxpayers—knowing the exact amount of liabilities helps in managing cash flow effectively. It allows taxpayers to plan for upcoming payments and avoid liquidity issues.

G. Audit

57. The Inspectorate of Sales Tax has been focusing on auditing VAT refund claims. Priority has been given to examining VAT refund claims, given the legislative requirement to complete processing of VAT refunds within 30 days. The OTA needs to go beyond the investigation of VAT refund cases, as VAT registrants may be under-reporting on payable VAT returns.

58. Critical components of an effective audit program are not in place. The following are several key components of an effective audit program that are currently missing: (i) there is no documented annual VAT audit plan that sets out the overall priorities and targets for detecting inaccurate reporting of VAT; (ii) audit risk selection criteria has not been developed that prioritizes audits; (iii) audit standard operating procedures have yet to be fully developed; and (iv) management of the VAT audit process is largely manual as the expected IT audit functionalities and features are not yet in place.

59. The auditing of VAT refund is not fully based on risk to VAT revenue. The OTA reports that 237 audits were completed. This resulted in a reduction of refund claims from SRD 175 million to SRD 116 million – a reduction of SRD 60 million, or 33.9 percent of the value of refund claims. However, audits are conducted on a first-in–first-out basis, to complete audits within the legislative prescribed time of thirty days.

H. VAT Refund

60. The filing of a credit VAT return triggers an immediate request for a refund, a formal request is not required. The VAT Act follows international good practice as the refund process commences once a credit return is filed. Where a legitimate refund exists, the authorities have 30 days from the date of filing to pay the refund. Interest is due and payable on approved delayed refunds. However, the OTA has not processed VAT returns timely, this has undermined the effectiveness of the VAT refund process.

61. Timely processing of VAT refunds presented a major challenge in 2023, as the refund functionality in the new IT was not deployed at the time of implementation. The Inspectorate Sales Tax has introduced a refund profiling mechanism that accelerates the processing of VAT refunds by developing three segmentation thresholds—if claims fall below the respective threshold, they are processed for payment without audit/examination; otherwise, the claims are sent for review. Initially, this has been done outside of the main IT system, but plans are in place to use the new IT system starting in at the end of January 2024. For the most part, the monitoring of VAT refunds is manual, including determining the average time taken to process refunds, the number and value of refunds processed, paid, and declined.

62. There is no system in place to refund persons who are not VAT registrants. Where there is a cause to refund a non-VAT registrant importer for VAT paid on imports, the Collector of Customs refunds the related duties and taxes but not the VAT. The importer is referred to the OTA. The initial view of the OTA is that no refund is due. Persons and entities entitled for VAT-free purchase may pay VAT and would be entitled to claim VAT refunds. The authorities indicated that this would have to be considered and the possibility of enhancing the IT system. While the legislation does not specifically provide for this, the clear intention of Government is that this category of persons is not so suffer VAT if items are acquired on terms specified in the Act. For certainty, a VAT Order, pursuant to Article 17, can provide for this.

63. The value of VAT refunds and the number of cases is significant and are likely to increase as VAT filing compliance increases. VAT returns submitted in 2023 reflect total credits of SRD 989 million. SRD 214 million (21.6 percent) was paid by the end of 2023. As at the end of December 2023, the stock of refund value was about SRD 671.0 million (67.8 percent), (Figure 3). An estimated SRD 11.5 million is expected to be paid by the end of January 2024.

View Full Size

Status of VAT Refund Claims

Citation: Technical Assistance Reports 2024, 042; 10.5089/9798400276477.019.A001

Source: Compiled by the mission from data provided by DoTC.

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64. The refund gap is widening. If the number and value of claims are not processed and paid promptly, the stock of refund claims will increase faster each passing month. Figure 4 shows the status of the gap as of December 2023.

View Full Size

Status of Accumulated VAT Refund

Citation: Technical Assistance Reports 2024, 042; 10.5089/9798400276477.019.A001

Source: Compiled by the mission from data provided by DoTC.

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65. The OTA has the authority to use revenue collections to pay VAT refunds. The Collector of Direct Taxes is responsible for the payment of VAT refunds.

66. The VAT law provides for interest to be paid on delayed legitimate refund claims. Interest is due on refund claims if payment is made after 30 days of the claims. However, the authorities are yet to compute, apply and pay interest on delayed refunds. One reason given, is that the functionality in the IT system is yet to deployed. The fact the functionality is not yet in place in the new IT system is not a reason for interest not to be paid, this amounts to a breach of the law. The authority should take immediate steps to rectify this breach and commence the payment of interest.

I. Information Technology

82. The implementation of the new IT system is a welcomed step and is producing positive results, notwithstanding the many challenges being faced in its implementation. Taxpayers can register and file tax declarations online. Tax authorities now have access to timely information, which is being used in the management of VAT. In addition to an online portal, the authorities have acquired two systems—Multi Tax System (MTS) and Multi Collection System (MSC) and linked through interface. The MTS is primarily used for registration, filing, assessment, and the determination of tax liability. The MCS is used for collection, payment of refund and collection enforcement. See Appendix II for modules and functionalities deliverables by the IT supplier.

83. VAT implementation and administration have been significantly impacted by delays in having a fully operational IT system that supports all core tax administration functions. International experience shows that successful implementation of VAT is predicated on the availability of a complete and integrated system that supports all core tax administration functions. While several modules have been delivered, several key functionalities were delivered late, and others have not yet been developed, evaluated, and deployed. Table 9 provides a summary of the releases, the period delivered, and the impact on operations. Ideally all modules and functionalities should have been in place prior to January 1, 2023.

^{Table 6.}

Status of the Delivery of Tax Administration System

^{Table 6.}

Status of the Delivery of Tax Administration System

Tax administration IT functionality	Release date	Possible impact on VAT implementation
Online VAT registration and assignment of FIN	October 2022	Released in time to allow VAT registration to take place.
Online filing of VAT returns	January 1, 2023,	Delivered on time (first VAT returns due by February 16, 2023).
Processing and Assessment of VAT returns	June 2023	Should have been in place by February 16, 2023. This impacted the timely processing of VAT refunds as there were no assessments in the system, and taxpayer account ledgers were not kept up to date.
Receipt and recording of VAT payments	February 1, 2023	Delivered on-time (VAT registrants were expected to make payments at the same time they filed VAT returns in February)
Monitoring filing/payment compliance	July 2023	Should have been in place by February 16, 2023. The impact is the DoTC did not know which VAT registrants did not file VAT returns and make payments on time. This delayed enforcement actions to address late filing and non-filing of returns, which impacted revenue performance.
Management of VAT arrears	July 2023	Accumulation of VAT arrears could have started in February 2023. The delay has impacted timely identifying, processing, and collecting arrears which has a potential on revenue performance. The new IT system provides limited support for collection of arrears (e.g., only supports sending of reminder letters).
Management of VAT refunds	July 2023	This was not ready for the processing of refund claims made in February 2023. This has significantly impacted on the processing of claims, as most claims were manually processed.
Management information reports	Still ongoing	Not all expected management information reports were released which requires OTA management to manually prepare reports.

View Table

^{Table 6.}

Status of the Delivery of Tax Administration System

Tax administration IT functionality	Release date	Possible impact on VAT implementation
Online VAT registration and assignment of FIN	October 2022	Released in time to allow VAT registration to take place.
Online filing of VAT returns	January 1, 2023,	Delivered on time (first VAT returns due by February 16, 2023).
Processing and Assessment of VAT returns	June 2023	Should have been in place by February 16, 2023. This impacted the timely processing of VAT refunds as there were no assessments in the system, and taxpayer account ledgers were not kept up to date.
Receipt and recording of VAT payments	February 1, 2023	Delivered on-time (VAT registrants were expected to make payments at the same time they filed VAT returns in February)
Monitoring filing/payment compliance	July 2023	Should have been in place by February 16, 2023. The impact is the DoTC did not know which VAT registrants did not file VAT returns and make payments on time. This delayed enforcement actions to address late filing and non-filing of returns, which impacted revenue performance.
Management of VAT arrears	July 2023	Accumulation of VAT arrears could have started in February 2023. The delay has impacted timely identifying, processing, and collecting arrears which has a potential on revenue performance. The new IT system provides limited support for collection of arrears (e.g., only supports sending of reminder letters).
Management of VAT refunds	July 2023	This was not ready for the processing of refund claims made in February 2023. This has significantly impacted on the processing of claims, as most claims were manually processed.
Management information reports	Still ongoing	Not all expected management information reports were released which requires OTA management to manually prepare reports.

84. The absence of a fully integrated system required the OTA to develop interim solutions outside of the system. For example:(i) processing and assessing of VAT returns had to be done outside of the system, which meant taxpayers accounting ledgers did not accurately reflect the amount of refunds a taxpayers were entitled to and the amount of arrears; (ii) slippage in releasing management information reports meant the OTA had to manually produce these; (iii) absence of automated solutions to support audit and collection enforcement activities meant work could not be easily be prioritized (e.g. lack of audit risk selection criteria) and actions need to be maintained outside the system.

85. There is a lack of clarity as to what should have been delivered and by when. The mission was told that the initial discussion to acquire this IT solution did not include VAT as a priority. When the government decided to give priority to implementing VAT, the IT provider was asked to support this implementation without producing an updated specification as to what would need to be delivered and by when. This has resulted in an ad-hoc series of discussions as to what and when to deliver.

86. The system lacks all functionalities to effectively manage VAT. The key features that are not currently in place: (i) online payment portal for taxpayers to make VAT payments; (ii) taxpayers can register and file online but they do not have access to view their taxpayer account details online; and (iii) several management information reports are missing.

87. There is no approved strategy/plan for incorporating management of all core tax types under the new IT system. The current legacy IT system handles the management of other core taxes such as CIT, PIT, and Wage Tax, and the new system handles VAT. Current discussions are targeting January 2025 to incorporate all core taxes into the new IT system. However, this creates a substantial institutional risk, as until the systems and data are integrated, there will not be a single and consolidated view of a taxpayer’s compliance history (e.g., no single taxpayer register, no single view of all tax returns and payments, no single view of a taxpayer’s account and financial status). This can have an impact on revenue performance (e.g., VAT refunds are paid even though the taxpayer has arrears on other tax types).

88. All remaining modules of the new IT system should be deployed in 2024. The authorities and the IT provider should revisit the piecemeal approach being taken in the development and delivery of the modules and functionalities. Ensure that a single taxpayer accounting system is in place that maintains detailed accounts for each taxpayer. Most business processes should be automated.

89. Ideally, the tax administration needs to have a single tax administration integrated tax system. While the MTS and MCS are currently designed around the current organizational arrangements, if feasible, consideration should be given to redesigning the system to have a single system, single taxpayer accounting ledgers showing details of all transactions and the states of each.

Recommendations

• Review returns to identify reporting errors and incomplete declarations, by March 2024.

• Taxpayers who make exempt supplies should report this on their VAT declarations, immediately.

• Establish a mechanism to capture data on supplies made to VAT-free entities and reduce abuse, by December 2024.

• Conduct registration audit, ensuring that taxpayers are assigned to the current business/sector, by December 2024.

• Conduct analysis on subsectors after cleanup of the returns’ data, sectors, and segmentation of taxpayers, by December 2024.

A. Overview of Customs Preparedness of VAT

103. VAT implementation at Customs was on time but was incomplete. For several reasons, the implementation was undertaken without full adherence to the many recommendations listed by the 2022 FAD mission and capacity development (CD) assignments leading up to the implementation. Implementation was deemed successful as the VAT was collected on time from imports, though it was conducted with improvisation and compromise and with little or no change to the inefficient systems and structures that exist within customs.

104. Training and information sessions were provided for officers and brokers. With the assistance of CARTAC, information sessions were developed and delivered before the launch. About 25 percent of customs staff were exposed to the principles of VAT. Customs worked in collaboration with a communication consultant to develop guides, flyers, and booklets and were involved with the OTA in delivering information to stakeholders.

105. A dedicated customs implementation team was not established. Customs considered it difficult, due to severe staff shortages, to dedicate staff full time to the VAT implementation project. Most senior officials, identified to be part of the team, remained in their substantive posts, and contributed to VAT implementation in an ad hoc manner. This resulted in gaps between the policy decisions of the government and the general staff of customs, as the staff were not properly informed of the policy and general information relative to the implementation of the VAT.

106. The implementation was done without the procurement of a new server. Three servers were required for VAT implementation: (i) a ‘live’ server to operate the day-to-day processing of declarations in ASYCUDA World; (ii) a backup server maintained in case of a failure of the live server; (iii) and a User Acceptance Testing (UAT) server that would be used for development, testing and training purposes. No UAT server was procured; the backup server was used for this purpose – a highly risky course of action. This also severely hampered the implementation process, as the significant preparatory work that needed to be done in the ASYCUDA System to allow for the smooth transition of the VAT could not be done. The new tariff incorporating HS2017, the VAT rates, the list of exemptions, zero-rated goods, and all the newly created customs procedure codes could not be uploaded into the ASYCUDA World System in time for the implementation. Funding was obtained from the Inter-American Development Bank in the first quarter of 2023 to purchase the servers.

107. Customs is still operating with the HS2012 tariff. The work to configure the tariff to HS2022 only commenced in June 2023 and is still ongoing. The mission was informed that the current upgrades will focus on ASYCUDA 4.3.3 and the HS2022. The HS2022 is currently being reviewed at the Ministry of Commerce and its implementation will ensure that the tariff is fully up to date with current world standards.

108. At implementation, the VAT Law had been enacted, but no Harmonized System (HS) codes were in place to codify the exemption list. The lists (schedules) of exempted and zero-rated goods had not been specifically determined at the time of launch. This significantly limited the scope and pace of preparedness of the customs as these lists needed to be specifically configured into the tariff with tariff numbers, procedure codes and rates. The mechanism within the system for the administration of the Sales Tax was used as an interim measure. This created a situation where, in some cases, VAT was charged on goods where it should not have been, and it is understood that none was charged where it should have. No detailed analysis has been done by customs; however, customs estimate that there was a one percent overpayment (gain) in revenue to the Government. It is understood that customs do not expect traders to seek reimbursement for overpayment.

109. The imposition of different VAT rates initially created challenges for customs —a standard rate of 10 percent, a rate of 5 percent for oil and gas, and a rate of 25 percent for certain categories of high-duty goods. There was no specific list with the corresponding HS Codes to properly identify the commodities to which each rate should be applied. This was also the situation with exempted and zero-rated goods. Confusion was compounded by the last-minute revisions of the exemption policy. The Customs team was not involved/consulted in the determination for the HS code for the respective category of goods.

110. The legacy Sales Tax rates and exemption list in the ASYCUDA system were used to implement the VAT. As mentioned above, the Sales list of exemptions for ST Tax had been used as the exempt list for VAT, although there were two categories of goods affected under the new regime: exempted and zero-rated. These categories have different applications under the VAT system. The standard rate of 10 percent was then applied to the remainder of the sales tax list in the ASYCUDA system. It appears that the 5 percent and 25 percent rates were applied on a case-by-case basis and as understood by customs managers, who had no clear and unambiguous policy directive to guide them. With no list of exempted and zero-rated goods and corresponding HS Codes, and cognizant of the limitations and lack of capacity of customs and the lack of guidance, it was left to the goodwill of the importers to make their declarations as they saw fit.

111. The transitional measures, including the extended bonded warehouse facility recommended to allow for the smooth implementation of VAT, were not adopted. Had this been adopted, the mechanism would have assisted in reducing the cascading of prices in the months immediately following the implementation. The price increase, due to cascading, blamed on VAT, created unease within the country, which then led to demonstrations and strikes and harmed the reputation of VAT as a revenue-neutral and fair tax.

112. The Collaboration between CED and OTA during the implementation was minimal. The common unique Taxpayer Identification Number (FIN) has not been introduced for customs transactions. The interface between ASYCUDA World and the OTA’s new IT system is still to be done. Customs continued to register entities using the ASYCUDA number. The old Tax registration number, even for persons registered with the OTA for VAT, still appears on the customs declaration. There is no formal link for sharing and/or cross-matching of data between customs and tax. The recommended export control regime has not been implemented. The export verification procedures used by customs have not been modified in any way to facilitate the implementation of VAT. A formal export verification protocol, based on risk analysis and allowing for the sharing of information, has not been developed. As stated in previous reports, this is a critical component for the prudent and efficient functioning and monitoring of the credit mechanism allowed under the VAT legislation. There is currently limited exchange of information with Tax. There is a gap between what the OTA knows about a taxpayer and what customs knows about that same taxpayer.

B. Measures Essential for the Effective Management of VAT

113. Management of the customs aspect of VAT is weak and requires urgent strengthening. The implementation of the customs elements of VAT in 2023 was characterized by improvisation and compromise. At many points, implementation could have failed because of slow or inadequate preparation, as key policy decisions came late in the day, essential equipment was not provided in time, and the tariff was not updated before the launch. Customs must ensure that the necessary steps to strengthen VAT – as outlined below – are implemented quickly and with discipline and accuracy.

114. However, VAT collected at Customs for 2023 was SRD 911.2 million more than the amount collected for Sales Tax in 2022. This represents a 48.9 percent increase. December 2022 was the only period for which VAT collected less than the Sales Tax. The reduction may be due to huge imports in November 2023 (Figure 9).

View Full Size

VAT Collection against Sales Tax

Citation: Technical Assistance Reports 2024, 042; 10.5089/9798400276477.019.A001

Source: compiled by mission team from OTA data

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115. Accuracy in classification, valuation, and origin are essential elements to ensure the correct VAT collection at import. The calculation of taxes at import is determined by three main features, namely: accurate classification in accordance with the harmonized system (HS); valuation of cargo following the rules of the World Trade Organization Agreement on Customs Value (1994); and the correct application of the rules of origin, in particular those that provide for exemptions from import duties such as the CARICOM free trade agreements and the Economic Partnership Agreement with the European Union (EU EPA). As VAT is the last tax applied, if inaccuracy or deliberate fraud in any of these areas is prevalent, the correct amount of VAT will not be collected. Several companies in Suriname who import commercial cargo have limited or no dealings with the OTA – so collecting the correct VAT at import becomes particularly important as this may be the only chance to collect VAT from these importers.

116. Undervaluation is a significant area of non-compliance that must be addressed. Customs believe that fraud by the deliberate undervaluation of cargo is rife and is in fact routine for many importers. Ensuring compliance in this key area is constrained by limited resources, a lack of information sharing, and an uncoordinated approach to compliance. There is no valuation database, though work on one for motor vehicles has begun, and training in valuation fraud is limited. In Table 10, below, the results of valuation efforts regarding motor vehicles can be seen. In this case, values were uplifted by approximately 16.5 percent in 2022 and by 37.40 percent in 2023. These efforts resulted in increased duties and taxes of approximately 16 percent in 2022 and approximately 13 percent in 2023. This illustrates the type of increase that can be expected from increased and purposeful efforts to address undervaluation.

^{Table 10.}

Customs Motor Vehicle Valuation (USD) Compliance Efforts

Source: Compiled by mission team from OTA data

^{Table 10.}

Customs Motor Vehicle Valuation (USD) Compliance Efforts

Year	Number of Valuation Investigations	Total of Original Declared Values	Total of Uplifted Values	Value Uplift	Average Value Uplift	Original Duties and Taxes	Uplifted Duties and Taxes	Amount of Duties and Taxes Uplifted	Average Duty and Taxes Uplift
2022	42	1,217,891	1,420,108	202,217	4,815	420,386	489,846	69,460	1,654
2023	71	1,105,886	1,519,741	413,855	5,829	719,437	815,544	96,107	2,288

Source: Compiled by mission team from OTA data

View Table

^{Table 10.}

Customs Motor Vehicle Valuation (USD) Compliance Efforts

Year	Number of Valuation Investigations	Total of Original Declared Values	Total of Uplifted Values	Value Uplift	Average Value Uplift	Original Duties and Taxes	Uplifted Duties and Taxes	Amount of Duties and Taxes Uplifted	Average Duty and Taxes Uplift
2022	42	1,217,891	1,420,108	202,217	4,815	420,386	489,846	69,460	1,654
2023	71	1,105,886	1,519,741	413,855	5,829	719,437	815,544	96,107	2,288

Source: Compiled by mission team from OTA data

117. Post Clearance Audit (PCA) is a valuable tool for building compliance, but it is not used in Suriname. PCA is one of the most powerful tools to combat valuation fraud. PCA utilizes both desk audits and more in-depth field audits to scrutinize traders’ records to ensure accuracy and honesty in their dealings with customs. As well as identifying errors, negligence, and fraud, PCA is proven to be a highly effective component of an informed compliance strategy. It is also beneficial for trade facilitation as it gives customs the confidence to release cargo quickly without time-consuming and costly examination and verification, as errors can be identified later, and any revenue losses recovered. The customs PCA unit, currently unstaffed, should be reconstituted and the officers provided with the necessary training, tools, and management direction.

118. Adopt the FIN to strengthen compliance and reporting. All revenue departments would benefit from using a FIN to record transactions. The FIN allows data cross-matching for risk management purposes on both sides, including comparing turnover to trade volume, detecting undeclared activities, identifying inconsistencies in quantities and values of transactions, and ultimately combating noncompliance, fraud, and smuggling. Among other topics of common interest are the control of customs valuation and schemes to prevent illegal access to tax credits through the simulation of exports.

119. Information Exchange between tax and customs must be strengthened. In addition to adopting and enforcing the use of a FIN, customs and tax should cooperate to share information and, importantly, explore ways to make the most effective use of the information that they share. Data may need to be explained, and the terminology used may not be clearly understood by either side, weakening the effectiveness of collaboration. To overcome this and to optimize the effect of sharing, a working group or task force should be created to explore what data is held by each side and discover ways of using this data to increase compliance.

120. The IMF Tax Revenue and Customs Knowledge Exchange and Research (TRACKER) tool provides an effective solution to information sharing challenges. The TRACKER is an IT tool that facilitates the exchange of information between the different revenue agencies and, if desired, with other government departments. Information on the tool was presented to the Directorate of Taxes during this mission. TRACKER is available free, and the necessary technical assistance (TA) is provided at no cost to the beneficiary. It can be implemented very quickly and can be a permanent solution for information sharing. The authorities should consider requesting this tool and associated TA from FAD.

121. Effective controls on exports must be implemented. As VAT involves cycles of both payment and refund, additional vigilance must be maintained in work areas where refunds are made. In customs, this typically centers on exports as an area whereby error, negligence, or deliberate fraud, VAT refunds for exports may not be accurate or be made where there is no entitlement. Observation of customs export controls in the port of Paramaribo indicates that the focus, especially the scanning of export consignments, is, understandably, on interdicting drug trafficking. The routine processing of export controls is entirely focused on the validation of documents presented with no meaningful attempt being made to verify the goods exported. Vigilance in the control of exports, including physical examination of export cargo based on revenue risk (i.e., VAT refund), should be a routine part of customs controls. Where customs controls require strengthening, as is the case currently, those responsible for VAT refund payments for exports should not solely rely on customs documents to confirm exports but should include checking other shipping documents such as Bills of Lading and Air Waybills as part of the verification process.

122. Suriname is an exemption-rich environment. While exemptions are a policy tool that is helpful in promoting economic development, monitoring and verification is necessary to prevent fraud and misuse, which can impact the VAT collection. As exemptions are given for a specific purpose, it is necessary that customs monitor the use of exemptions to ensure that beneficiaries abide by any conditions imposed in the granting of exemptions. This is not an office-based job but requires site visits and inspections, so officers who are tasked with this job must be given the necessary authority, information, and logistics support. It would also be helpful for any conditions applying to exemptions to be clearly and unambiguously made known to beneficiaries and for the granting ministry to consider the revenue forgone before approving any exemption.

123. Education and training for officers and brokers must be ongoing. During the mission, it became apparent that while officers and brokers had received information sessions on VAT, this has not been extended to specialized briefings directed at specific work areas and sectors. The export team, for example, appears not to have been given a detailed explanation of the need for the verification of exports as a part of the management of VAT. The information and education effort for both officers and brokers should be maintained, targeted, and specialized.

C. Overall Strengthening of Customs Operations

124. Customs administration in Suriname requires strengthening. This need is well understood in customs. Previous IMF missions and CARTAC Technical assistance assignments highlighted areas where improvement is needed and provided detailed guidance as to how this might be achieved. The advice given is still valid, and the Inspector and her management team should revisit those reports and develop an improvement plan based around the advice given and recommendations made in the mission and TA assignment reports.

125. Better customs administration will help optimize the VAT yield. A customs department that is more focused and purposeful with activities aligned to government policy objectives and departmental priorities will lead to increases in VAT collection. Strengthened customs compliance and enforcement efforts will reduce revenue loss due to errors and fraud, and enhanced trade facilitation measures will lead to increased trade and revenue yield.

126. The management of customs, including strategic planning, operational management, and performance management must be addressed. The starting point is for customs to be more purposeful and focused on contributing to government policy outcomes by having a clear strategic plan that includes prioritized strategic objectives endorsed by the Ministry of Finance. The way that the plan is implemented must involve a move to a more active style of management at all levels with roles, responsibilities, expectations, and quality and performance expectations understood by staff at all levels. This will involve clear instructions and meaningful and timely feedback, supported by data and clear direction, for better decision-making and resource deployment to achieve objectives and meet challenges.

127. Performance management must be a central pillar of customs administration. This is an ongoing process for ascertaining how well, or how poorly, an organization is achieving its goals and objectives. It provides feedback, in the form of objectively verifiable indicators, about internal business processes and external outcomes compared to measurable and tangible targets in the strategic and operational plans. As such, it is an essential part of the broader processes of strategic and operational planning. Having reliable performance management systems in place helps customs administrations better execute their mandate of collecting revenue, facilitating trade, and securing national borders by ensuring focus on purpose and objectives. Currently, customs only records and reports on revenue figures, and a broader set of targets and indicators that includes trade facilitation, human resource management, and enforcement targets as well as revenue should be adopted.

128. An effective headquarters (HQ) function in customs is a vital component of effective management. The HQ function acts as the “brain” of a customs administration, designing how customs should operate and monitoring to ensure that expected results are being realized. The HQ function is responsible for planning, providing advice and direction, problem solving, internal and external communication and liaison, training and staff development, integrity management, and the management of performance. At present, there are no approved customs manuals that specify the responsibilities, tasks, and powers for each division and position within the organization. This results in inconsistent decision-making and frustration for traders—the absence of standard operating procedures (SOP) alone can serve to underline the weakened state of customs administration in Suriname. The HQ should also drive management meetings and discussions across reform areas and initiatives. Such meetings are said to be infrequent at present.

129. There is a lack of formal communication within customs. Communication from unit to unit is by word of mouth. The facility in ASYCUDA World for sending out alerts, updates, and other pertinent information to the staff is not utilized. The reason given is that the staff do not read information sent via the system. There are no formal management or staff meetings; thus, there are no formal lines of communication. The result is that necessary information does not get to the staff on time basis, and there is the added danger that without formal lines of communication, there will be unreliable information provided, leading to inconsistency, error, and frustration by both officers and traders. Customs urgently needs to introduce better lines of communication, including management and staff meetings, circulars, and the use of the message facility in ASYCUDA World for this purpose.

130. Customs is under-resourced. The new container scanner and the new, purpose-built, customs building are encouraging signs of positive investment in customs administration. In other areas, however, increased investment is required. As can be seen in Table 11, below, customs have about two-thirds of its establishment in the post, and the key area of PCA has no resources. Additionally, it is understood that the Risk Management Unit (RMU) has a staff of four, as three of the team are permanently deployed on scanning duties. As part of the strategic planning process, customs should identify how resources are deployed and ensure that the right number of staff, with the appropriate levels of authority, training, and equipment, are deployed in the right places to achieve prioritized departmental objectives.

^{Table 11.}

Staffing in Customs

Source: DoTC-CED

^{Table 11.}

Staffing in Customs

Year:	2020	2021	2022	2023
Total in post:	222	219	207	204
Including:
Seaport	34	33	31	30
Air Cargo	16	17	16	15
Air Passengers	16	17	16	15
Guyana Border	16	15	16	14
French Border	7	7	7	7
PCA	0	0	0	0
RMU	6	6	5	5
Enforcement	15	16	15	15
Recruits	0	0	11	0
PCU	3	3	3	3
Suspended from duty (disciplinary)	2	6	8	8
Dismissed	0	0	0	2

Source: DoTC-CED

View Table

^{Table 11.}

Staffing in Customs

Year:	2020	2021	2022	2023
Total in post:	222	219	207	204
Including:
Seaport	34	33	31	30
Air Cargo	16	17	16	15
Air Passengers	16	17	16	15
Guyana Border	16	15	16	14
French Border	7	7	7	7
PCA	0	0	0	0
RMU	6	6	5	5
Enforcement	15	16	15	15
Recruits	0	0	11	0
PCU	3	3	3	3
Suspended from duty (disciplinary)	2	6	8	8
Dismissed	0	0	0	2

Source: DoTC-CED

131. The recruitment process is too slow and must be speeded up. Customs currently has about one hundred vacant posts. The recruitment of fifty officers begun in June 2022 and is far from complete. To date, only the first stage has been completed (advertising the posts and filtering out those applications that do not meet the basic selection criteria). Candidates will sit an exam, be interviewed, have medical and psychological tests, and other administrative procedures will need to be completed. The final group will enter the Police Academy for twelve months of training. It is possible that the fifty will not become operational until 2026 – this is simply far too slow, and the process must be accelerated to enable customs to address deficiencies and meet challenging objectives.

132. Risk Management is a vital component of sound customs administration. Effective risk management requires information to be collected, analyzed, and used so that intervention by customs can be more focused, effective, and cost effective. Use of information allows customs to make sound decisions regarding intervention or facilitation. This use of information for risk management is not well developed in Suriname, and so customs is, understandably, reluctant to grant facilitation for fear of significant revenue loss. Risk management, linked to the department’s strategic and operational priorities, will ensure that resources are deployed to areas of greatest risk and that a range of treatments are applied to build compliance. This will take investment in people, tools, and techniques in the RMU and the granting of the appropriate levels of authority to the unit. Also, it is important that managers and staff at all levels are aware of the risk management function’s purpose and understand their role in effective risk management.

133. Extracting, analyzing, and using data is essential for both performance and risk management. Effective performance and risk management requires accurate, timely, and objective data that is rigorously analyzed to support decision-making. Customs lacks the capacity to extract, analyze, and derive meaning from data. The risk management unit has been provided with some training by UNCTAD and utilizes some basic analytical techniques, such as Benford’s Law, but does not have the full range of skills, techniques, and tools necessary to make the risk management function data driven. Similarly, the Inspector does not have ready access to reliable data to measure performance. An approach should be made to CARTAC to provide technical assistance in this key area.

134. Management recognizes that issues of integrity adversely affect efforts to secure and enhance revenue. A holistic approach should be adopted to address integrity issues at customs. The legal framework under which customs officials operate needs to be reviewed to address issues of integrity, including the requirement to declare conflict of interest and other relationships that may affect the work of customs. There should be a legal mechanism to report, investigate, and address instances of bribery, corruption, and other related issues. The salary scales of staff need to be reviewed and made commensurate with the work, role, and function of staff as indicated in the World Customs Organization (WCO) Arusha Declaration. There is a need for more modern management control and supervision of the staff. In this regard, every effort should be made to optimize the use of all the modules in the ASYCUDA World system to reduce and or remove human intervention in the goods clearance process. Customs should work closely with the Chamber of Commerce and Brokers Associations to educate staff and stakeholders on the negative effect of corruption.

135. Major changes are coming, and customs must prepare now. Customs must invest time and energy in planning for the future. With the expansion of the oil and gas sector, significant and demanding new areas of work for customs will appear. This sector is complex and large, and because of the huge amounts of duties involved and the scale of the business, significant changes and increases will be required in customs operations. Customs need to learn about the ‘cost bank’ and the vital role customs will play in ensuring accuracy and devote significant resources to managing warehouses and shore bases. Preparation must begin now, as reacting to developments in this sector rather than anticipating them will put sound administration at a significant and potentially unrecoverable disadvantage.

136. Suriname is a member of the WCO and signatory to the World Trade Organization Trade Facilitation Agreement (WTO TFA). As part of the reform and modernization of customs, there should be a concerted effort to implement the concepts, principles, and practices promoted in these organizations’ treaties and conventions. Further, as signatory to the WTO TFA, Suriname is required to implement the provisions of that agreement. In the recent past, efforts were made by customs to implement risk management and post-clearance audits; however, these efforts were not fully brought into fruition. Customs should redouble their effort to implement these trade facilitation measures. Further, there should be a systematic approach to implementing the other measures of the WTO TFA. The successful implementation of the provisions of the WTO TFA would be a significant and worthwhile step in the reform and modernization of customs.

A. Donor Support

137. The DoTC has received significant support from an active donor community. With support from the IMF and the Inter-American Development Bank (IDB), key revenue administration initiatives have been funded and facilitated. The IDB is extending its support to the DoTC by launching a new funding program, aiming to enhance the overall efficiency and effectiveness of revenue administration. CARTAC’s resident advisors in tax and customs will continue supporting the DoTC by building capacity in specific core functional areas.

138. An important modernization initiative is the procurement of a new tax administration information system. The system was acquired to aid the implementation of VAT. Other taxes will be integrated later. If the system is fully utilized, several business processes will be automated and free up staff from manual and labor-intensive work, representing an opportunity for the DoTC to increase productivity. Other ongoing reforms seek to transform the DoTC into a Semi-Autonomous Revenue Administration (SARA). Following modern practices, a SARA will unify departments for both direct and indirect taxes, and a dedicated large taxpayer unit. With IDB support, the Surinamese government has secured a new facility in Paramaribo to serve as the DoTC’s headquarters.

139. Suriname is to benefit from the new FAD Global Public Funding Partnership (GPFP). This will provide four years of technical assistance in strengthening revenue administration. CARTAC will continue to provide support for CD requests not being delivered by the GPFP program.

140. To enhance the sustainability of CD (Capacity Development) implementation, the IMF needs to ground capacity CD into a Results-Based Management (RBM) framework. The IMF and CARTAC are funded by donors with a focus on monitoring outcomes and assessing results, not just delivery, to ensure value for money. RBM serves as a valuable tool for planning, monitoring, implementing, and evaluating CD, fostering prioritization and partnerships among the IMF, authorities, and development partners. All CD support from the IMF and CARTAC must be integrated into the RBM, and a strong partnership with authorities is vital across all stages, from request for CD to) project design, implementation, and evaluation. Appendix III provides an example of the framework.

B. Technical Assistance

141. The following capacity development needs have been identified, some of which have already been discussed with the authorities through the GPFP. CARTAC is prepared to further discuss and agree the areas for which they require TA support to further reform implementation in line with the recommendations of this FAD mission report. Key areas are: (i) strengthen audit function including developing a nation audit plan and build technical capacity; (ii) strengthen refund management; (iii) strengthen arrears management and enforced collection processes; (iv) develop standard operating procedures; (v) develop a VAT compliance risk-management program, including segmentation of taxpayers.