Guyana should not be paying any oil company’s taxes- University of Houston Instructor -Calls for arrangement to be removed from future contracts

Jun 16, 2019 News

By Kiana Wilburg

On an almost weekly basis, international consultants who review Guyana’s contract with ExxonMobil are flabbergasted at the overly generous fiscal terms and tax arrangements for the American multinational.

University of Houston Instructor, Tom Mitro

Speaking with Kaieteur News recently, University of Houston Instructor, Tom Mitro, said he found it quite peculiar that Guyana agreed to pay the income taxes for ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) and its two other partners on the Stabroek Block, Hess and CNOOC/NEXEN, out of the government’s share of the profits.
Mitro said that this is captured in Section 15.4 (a) of Guyana’s Production Sharing Agreement (PSA) with ExxonMobil, which notes that the Ministry pays Exxon and partners’ Corporate income taxes out of the Government’s share; then pass on a tax receipt to Exxon in their names which states that Exxon has paid the taxes.
With this receipt, Mitro said that Exxon is able to obtain a home country (U.S.) foreign tax credit for those taxes paid on their behalf.
The Petroleum Consultant said, “So effectively, Exxon pays no income taxes in Guyana, but gets a tax credit in the U.S. for taxes they did not actually pay…It’s unusual that Guyana would do this and it should move to have it changed in the model Production Sharing Agreement (PSA). It should also remove it from the current PSA during the next review.”
He added, “You should stop saying that you are getting a 50 -50 split. That is false because you have to pay the company and its partners’ taxes out of your share so stop focusing on that.”
In providing some historical context to the issue, the University of Houston Instructor said that the whole concept of the government paying the company’s taxes out of its production share started in Indonesia. He said that this was part of the earliest PSAs in the 1960s.
Since then, Mitro noted that almost all PSAs reduced the production-share going to the government in return for imposing actual income taxes on the companies’ share.
Mitro said that frankly, there are no real economic reasons for Guyana to continue the practice of paying the taxes for Exxon and its partners out of its share.