Oil companies rob Caricom countries millions of dollars annually through devious tax loopholes
Petroleumworld 04 16 2018
It is by no mistake that major oil giants like ExxonMobil, Chevron and Tullow Oil establish subsidiaries in Caribbean territories which have been classified as tax havens.
In a study at that was done by an international organization called Publish What You Pay (PWYP), it was noted that these companies seek such territories in order to engage in devious tax avoidance schemes.
In fact, the anticorruption agency stressed that the main purpose of these subsidiaries being planted in Caribbean countries is to secure “treaty benefits” that would otherwise be unavailable to them.
In its special report, PWYP explained that the CARICOM Treaty allows the “free movement” of money, goods and services. International oil companies in the islands make billions of dollars in profits and are able to transfer their moneys from the island that it is earned in, to its subsidiary in another, before making its way to the oil company's international headquarters. By doing so, the oil company avoids paying taxes on its profits to the host country.
PYYP notes that oil companies over the years have been abusing the CARICOM Treaty for years.
PWYP noted that Trinidad and Tobago provides a clear example of the challenges in this regard.
It said, “Petroleum companies producing in Trinidad and Tobago with headquarters in the United States and Canada have established subsidiaries in neighbouring countries covered by the Caribbean Community (CARICOM) Tax Treaty (e.g. Barbados, Saint Kitts and Nevis), thereby avoiding withholding tax on both dividends and interest. As a result, Trinidad loses an estimated $200 million per year.”
The organization noted that there are other nations, which are also aware of the risks such treaties bring. In this regard, it noted that Indonesia cancelled a treaty with Mauritius in 2004 over allegations of abuse and tax avoidance. India is currently in the process of renegotiating its tax treaty with Mauritius for similar reasons.
The anticorruption agency emphasized that it seems obvious that oil companies create subsidiaries with the sole intent of securing treaty benefits that would otherwise be unavailable to them.
There are concerns that Guyana may find itself in the same situation that its CARICOM sister, Trinidad, is in.
ExxonMobil is represented by three other oil companies in its Production Sharing Agreement (PSA) with Guyana. They are Esso Exploration and Production Guyana Limited, Hess Guyana Exploration Limited and CNOOC Nexen Petroleum Guyana Limited.
These companies are registered at the same office here: Lot 62 Hadfield and Cross Streets. But they are incorporated in different parts of the Caribbean.
Esso is incorporated in the Bahamas, CNOCC in Barbados and Hess in the Cayman Islands.
The Bahamas, Barbados and Cayman Islands are notorious for being tax havens; territories with an extremely low rate of tax or sometimes none at all while offering some degree of secrecy.
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Story by Kiana Wilburg from Kaieter News
Kaieteurnewsonline.com 04 15 2018
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