Oil companies reduces Guyana take
from 12.5 to 9% -International expert
Table 2 demonstrates that the impact of the tax payment by the Minister of Natural Resources to the
Guyana Revenue Authority would reduce the actual take of the country from 12.5% to 9% of profit oil
By Kaieteur News
Petroleumworld 10 04 2021
The unbelievably exorbitant tax giveaways in the 2016 Stabroek Block Production Sharing Agreement (PSA) have more detrimental effects on Guyana’s actual take than what meets the eye. The International Monetary Fund, the World Bank and even the Inter-American Development Bank have said for years that Guyana petroleum deal with ExxonMobil and its partners, Hess Corporation and CNOOC Petroleum Guyana Limited, leaves the country with a 14.5 percent profit oil take.
Table 2 demonstrates that the impact of the tax payment by the Minister of Natural Resources to the Guyana Revenue Authority would reduce the actual take of the country from 12.5% to 9% of profit oil.
But a recent analysis of the deal and the impact of its tax breaks to the oil companies reveal this to be an illusion as the country’s actual take is 9 percent.
This shocking disclosure was made by the Institute of Energy Economics and Financial Analysis (IEEFA), and its Director of Financial Analysis, Tom Sanzillo in its latest report titled: Guyana’s Tax Giveaway: Country Pays Exxon, Hess and CNOOC’s Annual Income Taxes.
In that report, Sanzillo examined the impact of the exorbitant tax concessions and waivers to ExxonMobil and its partners.
According to the Stabroek Block PSA, the Government of Guyana agreed to exempt ExxonMobil and its partners, from the payment of several taxes such as Capital Gains Tax that other local companies are made to pay. And in the instances where the government has agreed to accept the payment of taxes, it has chosen to pay same on behalf of the oil companies.
In simple terms, the PSA outlines that income gained by the contractor and the other parties is taxable but would be handled by the Minister of Natural Resources. And that tax would be paid over to the Guyana Revenue Authority (GRA) from Guyana’s share of the oil money, after which, the oil companies would receive a receipt stating that the said tax was settled. This would be presented by the oil companies to the American tax authorities to prevent being taxed on their profits which are shipped from Guyana to their head offices.
The one thing Sanzillo has done that financial institutions such as the World Bank, the IMF and the IDB have not done, is consider Guyana’s actual take of profit oil in light of the tax giveaways.
The specific income tax contract provision in the Stabroek PSA.
Expounding further on the grave impact of the concessions, Sanzillo said one ought to understand how the terms of the Stabroek Block PSA allows for the calculation of profit oil between Guyana and the Exxon Mobil led consortium.
He explained that for every barrel of oil sold, 75% of the revenue earned has to go towards covering expenses. The remaining 25% is what is deemed profit oil and is split equally between the State and the oil companies, leaving each party with 12.5% of gross revenue.
The IMF had said in previous analytical reports, that when one adds the meager two percent royalties, the country’s take moves up to 14.5 percent. But what Sanzillo exposed is this take does not consider the impact of the exorbitant tax concessions on that 14. 5 percent take.
After the Minister of Natural Resources pays the taxes owed by the contractor out of its share of the profits, Sanzillo said Guyana’s take is reduced to 9 percent.
The financial expert noted that it can even be lower when one considers the other gaping loopholes for revenue leakage in the oil agreement.
By Kaieteur News
kaieteurnewsonline.com / 10 03 2021
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