Oil companies apply to reclaim US$20M from GRA-AG Report

Jan 07, 2022 News

Kaieteur News – There has been a plethora of commercial activities directly and indirectly related to the nascent Oil and Gas industry in Guyana and as with any other business that attracts the use of the Value Added Tax (VAT) system, this would also apply to operations in the industry.

Auditor General, Deodat Sharma

To this end, the Auditor General, in his most recent audit of government’s financial records found that applications for VAT refunds by companies in the Oil and Gas Sector, to the Guyana Revenue Authority, for the year 2020 amounted to $3.757 billion.
This, the Auditor General said represented claims from 61 companies in the industry.
At 31 December 2020, VAT refunds totalling $673.517 million were paid, VAT Returns totalling $8.018 million were rejected, VAT credits totalling $66.215 million were disallowed and $773.925 million in VAT Refunds were being processed by the Authority.
This would mean that in addition to the $137B in tax waivers and concessions handed to the industry for the period 2019 to 2020—for the latter year alone – 61 companies made a request to reclaim an additional $4B.

Reporting on the very report produced by Auditor General, Deodat Sharma—released late last year—it was noted that tax exemptions for 2020 alone totalled $137B (US$700M) in foregone revenues, representing 62.75 percent of total collections by the authority. This means the $137B forgone by government through tax exemptions for that period, amounts to 62.75 percent of what was actually collected by the revenue authority.

Commissioner General, Godfrey Statia, in the report, was keen to note that the award of tax exemptions is not under the control of that agency. He said, the tax exemption regime is a matter of policy, and therefore only administered by the authority.
In fact, the Commissioner General reiterated that he is on record, as stating his preference for the removal of the concession regime and having it replaced with a system of tax credits, as practised in the developed nations, thereby allowing for improved compliance with the tax laws and the terms of Investment Development Agreements (IDAs).

Statia said, it should be noted that IDAs and conditional and unconditional exemptions are granted under Item 11 of the First Schedule, Part III B (ii) of the Customs Act.
He said the GRA from 2016 onwards, under new strategic directions from the Commissioner General, has undertaken several interventions that saw a significant reduction in the number and value of exemptions granted. Statia id caution that, “significant increase in exemptions is expected in the coming years, owing to the burgeoning Oil and Gas sector, and unless policy changes are effected, exemptions are expected to grow exponentially as the industry develops and matures, and in particular, if the Production Sharing Agreements (PSAs) for other blocks have similar provisions for exemptions.”

GRA was established under Chapter 79:04 of the Laws of Guyana and came into operation on the 27 January 2000 resulting in the transfer of the functions and powers of two departments. The Customs and Excise Department and the Inland Revenue Department and later, the addition of the VAT The Value-Added Tax Act of 2005 (subsequently renamed ‘The Value-Added Tax Act, Chapter 81:05) came into operation on January 1, 2007, by Order №. 1 of 2006 signed by the Minister of Finance on January 16, 2006 and amended by Act №. 6 of 2007 signed by the President on January 25, 2007.
The Act provides for the imposition and collection of VAT on goods and services and was levied at the rate of 16 percent on the value of every taxable supply by a taxable person in Guyana and every taxable import of goods or import of services, other than an exempt import.
The rate was reduced to 14 percent by Amendment №. 08 of 2016 to the Principal Regulations made under the Act and came into effect on 1 February 2017.