Latest update November 23rd, 2024 1:00 AM
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Institute anti-abuse legislation to guard against tax avoidance schemes by oil operators –Int’l Firm
GRA Commissioner General, Godfrey Statia
Given the troubles many countries have faced with collecting taxes from oil operators, the Natural Resource Governance Institute (NRGI) is recommending that Guyana and other emerging oil producers, institute strong safeguards.
At the top of the Institute’s list is a robust anti-abuse legislation which would allow revenue collecting authorities to reallocate items of income and expense.
Among other measures, the Institute called for there to be clear definitions and procedures concerning the treatment of transfer pricing and multiple mechanisms for the government to obtain and exchange taxpayer information from other governments.
But the NRGI is not the only body that is calling on Guyana to be cautious. In fact, Oil and Gas Expert, Anthony Paul has noted on several occasions that local authorities should pay attention to what happened in Trinidad and Tobago.
He pointed out during an interview with Kaieteur News that his homeland lost more than US$4,200M annually due to transfer pricing schemes of oil companies.
According to Paul, transfer pricing involves the purchasing of items from one company, or selling to related parties at artificially high or low prices. This is done to shift taxable income out of the hands of the host country. But that is just one form of transfer pricing. When it comes to oil and gas, the schemes are many.
The Oil and Gas Consultant said, “In another form of transfer pricing, some companies use mechanisms to increase the reported cost of their operations to again, reduce profitability and tax burden.
“A common example is the bundling of services with affiliates overseas, so that there is no transparency on actual cost, but the high costs can be moved to higher profit centres.
Oil and Gas Consultant and Local Content Expert, Anthony Paul.
This has been going on for years in TT, with companies using different techniques, knowing well that Government does not routinely check across jurisdictions.”
He continued, “Another victim of such actions, of course, is the local service industries, who, through a series of meandering rationales are told that they are either suddenly not safe enough, certified enough or competent enough to deliver a service they have been safely, efficiently and cost-effectively providing for years.”
The Chatham House Advisor added, “Suddenly, a foreign supplier is brought in, without necessarily having to go through the same hoops and is paid much more. Today, for instance, there are marine service companies working off the East Coast in TT, at the expense of locals and charging the operator up to 10 times the cost of the local who was doing it before.”
Paul said that examples on what to do in the oil and gas industry and how to protect Government revenue are all around Guyana.
“All its authorities need to do is simply pay attention.”
For the time being, the Guyana Revenue Authority (GRA) is gearing for a round of meticulous training from the Inter-American Centre of Tax Administration, an international agency that is versed in detecting any petroleum scheme used by oil operators.
This was confirmed recently with GRA’s Commissioner General, Godfrey Statia.
Kaieteur News understands that the Centre will provide GRA with a general overview of the oil and gas industry, information on tax regimes and tax models. As it relates to tax and contractual issues, GRA will be given a crash course in tax and contractual compliance, commodity pricing, ring fencing and transfer pricing.
Other issues to be discussed include: tax administration structure and procedures, tax risk assessment and evaluation and tax audit procedures.
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