Our politicians should have taken some basic lessons on developmental concepts

Aug 22, 2019 Letters

DEAR EDITOR,

Reference is made to your news reports, editorials, and Peeping Tom on royalty. Our politicians need to understand the concept of royalty fee. Royalty in economics is a term used for payments (a percentage or portion of the gross amount or a fee for extracting resources on land). The land can be government or privately owned. All multinationals or any business company pays (a fee) or a royalty for extracting resources from the land regardless of who own the land. In short, royalty is a fee for exploiting resources. This concept of royalty is explained in developmental economics which I studied in graduate school. One also learns about it in the sciences and even in law.
Anyone with basic knowledge in the social sciences would have learned about royalty – you don’t need to study brain surgery to learn about royalty, and you learn about it in various disciplines. When I started college at the tender age of 17, I completed the requirements for a BS in Bio-Chemistry at age 20 but decided to stay on and complete the major in Political Science. The concept of royalties is also explained in political science courses relating to international politics and law. In Bio-Chemistry, we also learn about natural resources used in the sciences. I had a couple of Chemistry professors who were into the mundane insisting students know where resources come from and how they are obtained. So I learned the term royalty when I pursued my BS in Bio-Chem and also when I did the Political Science BA major that allowed me to complete admission requirements for the MA in International Relations in 1982. I also learned about it in my studies on constitutional law and in international law. While pursuing doctoral studies in Political Science at NYU, I simultaneously did a MA in Economics at City College after which I also did doctoral studies in Economics at CUNY Grad Center. It was during my MA ECO at CCNY and doctoral studies in Economics at CUNY Grad School, I was able to learn varied developmental concepts including “Royalty” fees that are so critical for development of third world countries. Our politicians should have taken some basic lessons on developmental concepts. And if they lack such knowledge, they should have sought it from learned individuals so the country gets the highest royalty.
Businesses are using important resources of our country; they must pay a fee which is from the total amount of the revenues. Some countries charge as high as 20%. Royalty fees constitute a substantial percentage of the budget of poor countries although it accounts for only 2% of the GDP of the US. If we were to get 10% royalty, the country would earn tens of billions of dollars.
In virtually no part of the world is royalty recoverable. Once the company pays the royalty fee, it is not recoverable and is not declared as expense for tax purposes. All further proceeds are taxed and the state may choose to grant some tax exemption of revenues (profits). The state never pays all the taxes. And royalty is paid before any expenses are paid. It is a percentage of the gross amount before expenses and taxes. In the Guyana case, the country gets royalty after the expenses are paid or the country collects royalty minus the expenses. So the country could get zero dollars in royalty.
Those who study basic economics, and for sure those like me who pursed graduate studies in political science or economics or even sociology, would know that royalties are not recoverable. The state or holder of the land gets the royalty payments first and foremost before expenses are deducted. Even the US, Canadian, and UK governments collect royalties. And in no part of the globe is royalty one or two percent; Guyana holds the record for the lowest royalty. This should and must be re-visited. The government should consult with qualified personnel to maximise royalty.

Yours truly,
Vishnu Bisram (PhDs)

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