It is unpatriotic for Guyana to be illegally paying Stabroek Block partners’ income taxes

Jul 13, 2021 News

– PPP/C must decide if it will stand with the country or oil companies – Ram

Kaieteur News – Even though there are countries around the world which take on the burden of paying the income taxes of oil companies, it only occurs because the nation’s laws allow for it. However, this is not the case in Guyana. According to the 2016 Production Sharing Agreement (PSA) governing the Stabroek Block, Guyana has agreed to pay the income taxes for ExxonMobil, Hess Corporation and CNOOC Petroleum Guyana even though the nation’s laws do not allow for this to occur.

Chartered Accountant, Christopher Ram.

Upon highlighting this major illegality in his recent writings, Chartered Accountant and attorney-at-law, Christopher Ram, categorically stated, that the PPP/C government must decide if it will stand on the side of the country or the oil companies. He stressed that it is unpatriotic for the country to be paying the taxes of these oil companies when the law makes no provision for this to occur.
Ram said that the choice for the government on this matter should be an easy one while adding, “We should not allow ourselves to be colonised all over again.”
Expounding further, Ram was keen to point out that the current arrangement of paying the income taxes for the oil companies is called the “Pay on Behalf” (POB) system. He said it is in conflict with two of the nation’s laws, specifically the Petroleum Exploration and Production Act Cap. 65:04 (PEPA), and the Financial Administration and Audit Act (FAA).
The Chartered Accountant noted that Section 51 of the PEPA provides for the modification of four Acts in respect of licencees under a production sharing agreement. The Acts are the Income Tax Act, the Income Tax (In Aid of Industry) Act, the Corporation Tax Act and the Property Tax Act, which extends to the Capital Gains Tax Act as well. These modifications say nothing about these companies being exempted from these taxes, and the burden of paying same being transferred to the people of Guyana.
He further noted that Section 10 of the PEPA says, agreements must be in accordance with the Act. In other words, Guyana’s Production Sharing Agreements should not include any provision regarding the POB formula since the law does not permit same.
Ram therefore concluded that former Finance Minister, Winston Jordan, went beyond his powers to extend concessions to persons who do not hold licences or agreements that are in agreement with the law of the land.
The Chartered Accountant said, “The Granger Administration, which signed the 2016 Agreement, and the PPP/C Administration before and after it, will have an enormous task of justifying whether and how a modification or inapplicability of a tax law can amount to a reversal of a statutory obligation, whereby, a tax liability payable to the State ends up with the Government paying that tax.”
The lawyer further noted that the FAA in particular appears to raise an insurmountable hurdle. In this regard, he articulated that it requires any remission, concession or waiver to be expressly provided for in a tax Act or subsidiary legislation. Since the POB is not part of the formula, Ram categorically stated that its use in other agreements is illegal.
With this in mind, Ram said, “it seems that the oil companies might have thought that the vaguely worded Order No. 10 of 2016 (that was passed by the Granger Government in Parliament) to give effect to the Petroleum Agreement, would allow the pay-on-behalf-of trick. But the FAA deals with that as well. It provides that no Order (or other subsidiary legislation) will be valid unless the Act under which the subsidiary legislation is made expressly permits the remission, concession or waiver.”
Ram added, “The Order is made under the PEPA which does not, even by implication, let alone expressly, permit the POB formula.”
In conclusion, the Chartered Accountant said it is clear that the Stabroek Block Agreement contains several provisions that are not in keeping with the nation’s laws.

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