Exxon pays the US Government taxes on profits made in Guyana but not taxes in Guyana

Jun 08, 2021 Letters

Dear Editor,

Discussing Guyana’s lopsided oil contract, I have often called for a quick comparison with Suriname’s contract which provides for three streams of revenue for the host country (royalty, profit-share, profits’ tax) versus Guyana’s which provides for royalty and profit-share but no profits’ tax.
This comparison exposes the lopsided nature of Guyana’s contract. On the royalty, Suriname gets a cool 6.25% royalty vs Guyana’s 2%. On this score alone, the difference between 6.25% and 2%, Guyana loses an estimated $23 billion on 9 billion barrels assuming a price per barrel of $60.
On the score of the profits’ tax, Prof. Ganga Ramdas estimates that ExxonMobil would have had to pay $62 million a year on the past year’s three lifts of one million barrels each. Guyana loses out big time in waiving the profits tax for the next 30 years.
One active Facebook blogger, Mohamed Karimullah, defending Guyana’s oil contract writes, “Mike Persaud does not take into account that the Surinamese Oil company, Staatsolie, puts up startup and working capital while GoG puts up a fat zero.” Therefore Suriname, he says, deserves a higher rate of return on revenues.
Is this a fair point? Of course, an investor putting up actual dollars takes a greater risk – and therefore deserves a higher cut of revenues, if the business is successful. But there is a missing point here. The oil companies are allowed to deduct all their expenses – startup capital and working capital. Even interest on borrowed money is deducted. So, Karimullah’s argument is based on false reasoning.
And, once there are proven reserves (the discovery was made before the contract was signed in 2016) and the world demand for oil is not threatened, there is absolutely no risk. Battery powered vehicles are on the horizon – but there would be no significant decline of demand for the next 30 years. Had the GoG chosen to put up capital it would have made no difference. It would have cost the GoG nothing – as every dollar invested plus interest is deducted in the line item called 75% Cost Recovery.
Now the waiving of profits’ tax. This is a pure giveaway. Imagine ExxonMobil has to pay profits tax on profits made in Guyana to the US government but pays nothing to GoG on profits made in Guyana. Something is terribly wrong. There is absolutely no justification for such an anomaly. The people of Guyana are being ripped off. Plain and simple.
Yours truly,
Mike Persaud.

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