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Guyana will feel the squeeze for not instituting resource rent tax – Ramson
Attorney-at-Law, Charles Ramson
As oil prices continue to rise, Guyana is likely to lose out significantly as a result of its failure to institute a resource rent tax on oil companies operating here.
This was recently pointed out by Attorney-at-law, Charles Ramson Jr.
Ramson, who has a Master’s Degree in oil and gas management, said that Guyana should quickly look to include provisions for resource rent tax that should be paid by oil companies that will secure blocks in the future.
A resource rent tax is a tax on profits generated from mining of non-renewable resources in many countries, including Australia.
In Australia, the tax is levied on 30 percent of the “super profits”.
A company pays the tax when its annual profits reach US$75 million, a measure designed so as not to burden small business.
Ramson told Kaieteur News that in other models of Production Sharing Agreements, “there is something called the resource rent tax. We do not have that in our model.” He said that as a result, Guyana will not be able to capture any excess revenue.
“Let’s say for instance that price of oil balloons without the production increasing; what happens as a result is that your economic rent increases. Your economic rent is basically anything over the cost of production and the return on capital. So after you have cleared all expenses, anything above that is what you call economic rent. If that price for oil increases without doing anything differently on your production method and mechanism, you have gained an additional profit.”
He said that oil companies enjoy working in countries where there is no resource rent tax “and that is why you are hearing that companies like Hess and CENOC/NEXEN and ExxonMobil are trying to offload their assets in other countries and invest here, because they know they can extract the largest share of profit from a territory without resource rent tax. That is why I am saying that a resource tax should be included as part of our Production Sharing Agreement”.
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