Investigation reveals SOL Guyana Inc. avoided payment of $1.2B in taxes

Mar 07, 2021 News

– GRA uncovers massive abuse of tax exemptions for fuel, wants defaulters prosecuted

Commissioner-General of GRA, Godfrey Statia.

Kaieteur News – An investigation that was recently launched by the Guyana Revenue Authority (GRA) has uncovered damning instances where major oil importers abused access to exemption letters, thereby leaving the State losing hundreds of millions of dollars in revenue.
President, Irfaan Ali; Attorney General and Minister of Legal Affairs, Anil Nandlall; and Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh were informed of the status of this probe last week by the Authority via a letter.
In the letter seen by Kaieteur News, the tax body said that for several years, it had engaged in the practice of allowing major oil companies to import and enter tax-exempted fuel for various businesses who benefitted from partial or full exemptions on fuel.
In so doing, GRA said that oil companies are required and expected to, inter alia, deliver the full exempted quantities imported and entered to all such beneficiaries, which the beneficiaries are expected to utilize for the intended purposes. In 2017, GRA’s Commissioner General, Godfrey Statia, had instructed the Law Enforcement and Investigation Division (LEID) to make visits to the beneficiaries’ places of business to ensure this was being done. Much to his disappointment, LEID officials discovered that the import and clearing of fuel through the Permission for Immediate Delivery (PID) system was flawed since oil importers was utilizing exemption letters to clear fuel without regard to whom it was destined for, i.e., whether the fuel was fully exempted, partially exempted, or subjected to tax.

Attorney General, Anil Nandlall.

Upon a request for explanations, it was noted that the oil importers’ excuse was that the fuel were held in so-called “virtual tanks” for delivery to the beneficiaries when needed.
In correspondence seen by Kaieteur News, President, Nandlall and Dr. Singh, were informed that “This explanation shows distinctly that there were commingling and the oil importers were abusing the system whereby not all exempted fuel cleared by the importer was being acquitted by the beneficiary, thereby allowing the oil importer to benefit from increased cash flow by not paying the government on the required basis.”
The tax boss informed the officials that he thereafter instructed LEID and the Customs and Exemptions Tax Office to commence reconciliation exercises between the fuel importers and fuel beneficiaries beginning with the major beneficiaries, namely, the Guyana Gold and Diamond Miners Association (GGDMA), Bosai, Aurora Gold Mines, Rusal and in late 2020, on Exxon. All three major oil importers, SOL, Rubis and GUYOIL, were involved. GRA noted however that SOL’s involvement was to a greater extent.

GRA was keen to note that, coming out of the probe, the results were startling. In all cases, the trend was observed where some of the major oil importers would have imported and entered the fuel at duty free rate using the beneficiaries’ tax exemption letters, but failed to deliver the full quantities to the beneficiaries, as required. In the case of GGDMA, $482M worth of fuel was not delivered along with $53M for Aurora, and $61M for Rusal.
In late 2020/early 2021, it was noted that ExxonMobil was also a beneficiary. In this regard, GRA said that evidence so far reveals that as early of 2015, the system was being abused by SOL Inc., whereby exemption letters were utilized to clear fuel while the full quantity was not delivered to Exxon. With the exception of Exxon, which is now awaiting final decision on $2.6B cleared and not delivered, all amounts have been paid, the tax body said.

Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh.

The tax body was also keen to inform the senior government officials of one of the more recent cases involving SOL and Bosai.
For the period January 1 to September 30, 2020, it was noted that a total quantity of 34,554,080 litres of Gas Oil was imported and duly entered by Sol Guyana Inc. using both of Bosai company’s tax exemption letters with references LT02-2020 406 and LT02-2020 417.
Of this quantity, certified records submitted by SOL Guyana Inc. and Bosai company revealed that only the accumulated quantity of 20,691,379 litres was delivered to the beneficiary. This meant that the balance of 13,862,701 litres should have remained in SOL’s possession.
To this effect and based on the incontrovertible evidence obtained, the Revenue Authority demanded the forgone Excise Tax in the sum of Six hundred and six million, nine hundred and seventy-eight thousand, three hundred and sixty-three dollars ($606,978,363) on the 13,862,701 litres of Gas Oil which was imported, duly entered free of Excise Tax and was not delivered to Bosai company to be utilized for the intended purpose.
In an email dated November 27, 2020, GRA said that Sol Guyana Inc. accepted the liability. However, it further alleged that in past periods, notably during 2018-2019 the company supplied in excess of 24 million litres of duty paid diesel at duty free price to Bosai company without exemption letters.

GRA pointed out however that the alleged quantity (24M litres) stated when reconciled was found to be only 20.3M litres, clear evidence that Sol Inc., does not keep adequate records of acquittals.

It was further noted that tax officials are currently examining Bosai’s Exemption records to see whether the company acquitted fuel from other importers in 2018 and 2019, since they were in receipt of exemptions during the period claimed.

Taking the foregoing into consideration, the tax body wants to examine ways of having SOL prosecuted and the relevant taxes and interests recovered in light of the abuses committed.
GRA believes that the Attorney General should have a say on the way forward too.