Guyana’s payment of ExxonMobil’s taxes will be equivalent to 2021 budget – Int’l Financial Expert
By Kaieteur News
Petroleumworld 09 30 2021
According to the Stabroek Block Production Sharing Agreement (PSA), the Government of Guyana has agreed to exempt ExxonMobil and its partners, Hess Corporation and CNOOC Petroleum Guyana Limited, 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.
By 2025, such an unbelievably sweet tax deal will cost the Guyanese people US$1.7B—the equivalent of its 2021 national budget.
This shocking revelation was made in a recent report by the Institute of Energy Economics and Financial Analysis (IEEFA), and its Director of Financial Analysis, Tom Sanzillo. This latest report examines the impact of the exorbitant tax concessions and waivers given to ExxonMobil and its partners.
In his report titled: Guyana’s Tax Giveaway: Country Pays Exxon, Hess and CNOOC’s Annual Income Taxes, Sanzillo was keen to note that the PSA establishes that income gained by the contractor and the other parties is taxable but would be handled by the Minister of Natural Resources. The tax would be paid over to the Guyana Revenue Authority (GRA) from Guyana’s share of the oil money, following 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.
Sanzillo estimates that Guyana may receive annual oil payments that amount to approximately US$6.8 billion in pre-tax revenue from 2021 to 2025. But of this amount, US$1.7B accounts for corporate taxes Guyana will pay for ExxonMobil and its partners.
“Using the current tax corporate tax rate of 25%, the Minister would be required to pay at least 25% of this amount, or US$1.7 billion,” he calculated.
Sanzillo pointed out that corporate tax concessions can be useful if the country granting them derives some benefit from them, but this cannot be said of Guyana’s agreement with ExxonMobil.
“This tax giveaway is just one more way that the public is being shortchanged,” he noted, adding it is one that is also “unnecessarily burdensome for Guyana.”
Further to this, Sanzillo drew attention to the “unwillingness” of the current administration to make public, the full details regarding tax compliance and payment, citing that it raises “even more questions about the fairness of this deal.”
And while the government under the leadership of President, Irfaan Ali, pledged on numerous occasions to be transparent about the details of the oil sector, many questions are still left unanswered.
IEEFA plans to publish additional details and analyses of contract provisions that benefit the companies at the expense of Guyana’s fiscal health.