Don’t be fooled!-Ram warns

May 05, 2018 News

Chartered Accountant, Chris Ram

Chartered Accountant, Christopher Ram has commended the Guyana Revenue Authority (GRA) for the steps it intends to take to effectively deal with the accounting tricks of oil companies.
In his recent writings, Ram opined that it may very well turn out to be “a battle of wits” as the oil companies will have extremely high quality staff with decades of international experience in “creative accounting”.
The Chartered Accountant stated that GRA Commissioner General, Godfrey Statia, may encounter some degree of challenge when it comes to the accounting standards that ExxonMobil is expected to follow.
According to the Production Sharing Agreement (PSA) it has with Guyana, the American multinational company is required to employ accounting techniques which abide by the rules of the International Financial Reporting Standards (IFRS).
But Ram stressed that GRA or even the citizenry at large should not find too much satisfaction or relief in the IFRS provision. In this regard, Ram highlighted that the rules of accounting under the International Financial Reporting Standards are not as rigid as Statia or others may believe.
The Chartered Accountant noted that widely differing or shady accounting policies pursued by different companies are often considered IFRS-compliant.
In this regard, Ram said, “Countries do however have the sovereign power to make, repeal and amend fiscal legislation but Guyana runs into the wall of the everlasting stability clause in which the sovereignty of the Parliament is compromised in relation to the oil companies.”
SAFEGUARDS
Oil companies are notorious for using inflated costs, among other devious accounting mechanisms, to reduce the profits that should go to the countries that they are operating in.
But Statia recently assured that all is being done to ensure that safeguards are put in place to combat such practices.
During a recent Press Conference, the Tax Chief said that addressing inflated costs, among other relates issues, requires that there is adequate information flow at all times with all oil companies.
He said, “You cannot wait until the end of the period within which you are going to start an audit or I wouldn’t even call it that, I would say a review. A review should be continuous. You should have persons on the spot specifically trained in these activities and have them reviewing the activities on a day by day basis…”
Commenting further on the need to have competent staff, Statia revealed that by 2021, GRA’s team would increase by 100 persons. He said it would entail people from all spheres of the petroleum industry.
The Tax Chief said, “We would need to have a mix of engineers and lawyers too or else you would be in problems etc. Additionally, we are slated to send eight persons from GRA to England to study oil and gas and we are trying to be at the forefront of these issues instead of waiting on the other departments.”

GRA Commissioner General, Godfrey Statia

The Commissioner General subsequently reiterated to Kaieteur News that GRA is working to ensure that the necessary safeguards are in place so that Guyana gets its fair share of taxes.
INFLATED COSTS
Statia also informed this newspaper that he is very much aware of the tricks employed by oil companies around the world, especially as it relates to using inflated costs. The tax chief said that he has reviewed several case studies, which include nations such as Indonesia.
ZERO PROTECTION IN CONTRACTS
Any careful assessment of Guyana’s Production Sharing Agreements (PSAs) with ExxonMobil, Tullow Oil, Ratio Oil, Eco Atlantic and CGX, would reveal that there are mechanisms in place for these oil operators to recover their exploration, development and production costs.
But what is lacking in all of these contracts is a single clause that speaks to how the Government of Guyana should deal with inflated costs or any devious financial schemes, once detected by these entities.
While such loose provisions exist, other nations have ensured that the necessary provisions have been taken to guard against inflated costs.

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