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If successful, Hess and CNOOC would pay over $4B in taxes for 2020 alone -Ram
Historic challenge to Stabroek Block PSA…
– subjected to 40% tax on future profits
Kaieteur News – Upon noting and analysing the historic case filed last week against the onerous tax provisions of the Stabroek Block Production Sharing Agreement (PSA) by Kaieteur News Publisher, Glenn Lall through his lawyer, Mohamed Ali, Chartered Accountant and Attorney-at-Law, Christopher Ram says if the matter is successful, there would be significant fiscal benefits for the country.
Chartered Accountant and Lawyer, Chris Ram
In his widely read and revered column, Every Man, Woman and Child Must Become Oil-Minded, Ram said perhaps the most significant fiscal effect of the legal challenge will be the taxes to be paid by the Stabroek Block partners, being Esso Exploration and Production Guyana Limited (EEPGL), Hess Corporation and CNOOC Petroleum Limited, on their share of Profit Oil.
Ram in his column said, “This is hugely consequential both for the oil companies and the Government. In 2020, Esso reported a loss while its two partners Hess and CNOOC reported total profits of $16,175 million. At the standard applicable rate of Corporation Tax, and without any tax adjustments for timing differences or losses, those two companies alone would have to pay approximately $4,000 million and a further 20 percent on branch withholding tax on their after-tax profit, less any amount re-invested.”
The Chartered Accountant added, “To put it another way, if instead of having the Government pay its taxes, the oil companies now have to pay taxes like the average taxpayer, they would be paying tax at the combined rate of as much as 40 percent of taxable income. Contrast this with the current regime under which the Government pays the taxes for the oil companies but issues to them a certificate that they have paid taxes in Guyana.”
Ram, in conclusion, believes the case in its entirety is significant for the nation while noting that it will be interesting to see how the nation’s leaders would react to same.
The case filed by Lall via his Attorney-at-Law Mohamed R. Ali, is set to be heard on March 10, 2022 at 10:30hrs before the Honourable Justice Nareshwar Harnanan.
REASON FOR LEGAL CHALLENGE
Asked about the reason for his court challenge to the contract, Lall had said that when one takes into consideration, the extent to which the provisions of the contract create oppressive circumstances that hinder locals as well as the extent to which it breaches the laws, there is no way he could sit back and not take action.
What also incensed the KN publisher is how costly these provisions are to the nation. Lall said, “When you take into account the cost of these provisions to the country, the enormous revenue Guyana is giving away and the impact it can have, and it will have, on the country and its citizens, it is unimaginable. It must therefore be challenged. For example, we gave away US$720M in 2020 alone in taxes to the oil companies and that was a figure from the Auditor General’s Report.”
The publisher continued, “But even that is not entirely accurate, if we are to take into account what is being given away, when we look at the oil production figures. But let me give an example of what that US$720M could do for us. Had Guyana collected that, it could have increased the public service salary 10 times. It could have given us a bridge across the Demerara and Berbice Rivers and another from Parika to Leguan half way. And I don’t want to talk about the number of roads that US$720M could have repaired. These are the things that have been eating away at my soul that forced me into moving to the courts.”
Lall said he moved to the courts not just as the publisher of the newspaper who is passionate about his duty to the people but as a citizen, who refuses to sit idly by while the lion’s share of the oil wealth is given to foreign companies and Guyanese are relegated to eating the crumbs that fall from the table.
Lall, who said that the case was in the making for just over nine months, categorically stated that he reposes the absolute confidence in the judiciary here to determine the case but noted, nonetheless, that he is prepared to go all the way to the Caribbean Court of Justice (CCJ) on the matter.
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