Exxon argues Govt. empowered to modify law in favour of contract to grant tax waivers

Apr 03, 2022 News

Glenn Lall vs. State….

By Rehanna Ramsay

Kaieteur News – ExxonMobil’s Subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), is arguing strongly that the Government of Guyana has the right to modify the law in favour of the contractual agreement which provides the company with broad tax waivers.

President of ExxonMobil Guyana, Alistair Routledge.

Kaieteur News Publisher, Glenn Lall.

This contention is raised in the company’s affidavit submitted to the Court this past week, in opposition to the case filed by Kaieteur News Publisher, Glenn Lall, over the Government’s decision to grant Exxon and its subsidiary expansive tax exemptions. EEPGL was recently added as a respondent to the case.
According to the court document, signed by President of ExxonMobil Guyana, Alistair Routledge, EEPGL holds the view that the arrangements made between the oil company and the Government of Guyana are based on a simple contractual agreement.
Under that agreement, the Government, represented by the Minister responsible for petroleum, accepted their share of profit oil (crude petroleum) as satisfaction in full of the contractors’ respective shares of income and corporation tax payable in respect to the petroleum operations.
Further advancing its contention, EEPGL said that the Minister is provided with the contractors’ tax returns and submits these to the Guyana Revenue Authority (GRA), which then issues tax certificates certifying that the sums represented on the certificates have been paid as income and corporation tax.To buttress its argument, the company cited Section 51 of the Petroleum Act which states: “The Minister assigned responsibility for Finance may, by order, which shall be subject to affirmative resolution of the National Assembly, direct that any or all of the written laws mentioned in sub-section (2) shall not apply to, or in relation to, a licensee where the licensee has entered into a Production Sharing Agreement (PSA) with the Government of Guyana.”
Further, the EEPGL noted that paragraph three of the Section 51 order provides: “For the purpose of giving effect to the Petroleum Agreement if so required by those provisions, any or all of the written laws mentioned in section 51(2) of the [Petroleum] Act shall not apply to the Licensees [EEPGL] or, as the case may be, shall so apply to the Licensees with all the adaptations, exceptions, modifications and qualifications to those laws as, at the date of the Order, as set out in the agreement.”
This, the company said, is to be interpreted to mean that the Government of Guyana is legally empowered to modify or adapt the usual process referred to by which tax is paid to the Commissioner-General of GRA.
The added respondent, EEPGL, noted, too, that part of the amendment to Section 51 of the Petroleum Act was specifically amended to refer to a “Production Sharing Agreement” and it was Parliament’s intent to recognise “this modification and adaption as is consistent in PSA agreements throughout the world and common practice in the oil and gas sector.”
EEPGL noted, therefore, that Section 51 of the Petroleum Act does not contravene section 6 of the Financial Administration and Audit (FAA) Act as alleged by Lall.
The company held that “…Both the Petroleum Act and the FAA Act are statutes of equal or concurrent jurisdiction, and so a provision of one cannot be deemed to ‘contravene’ the other as the Applicant is alleging, even if they are inconsistent with each other.”
Added to this, EEPGL submitted that it is the Minister responsible for Finance who was specifically empowered by Section 51 of the Petroleum Act to make the Section 51 Order, effecting the changes to several specific tax Acts.
“…Part VI Section 51 of the Petroleum Act provides that (1) The Minister assigned responsibility for Finance may, by order, which shall be subject to affirmative resolution of the National Assembly, direct that any or all of the written laws mentioned in sub-section (2) shall not apply to, or in relation to, a licensee where the licensee has entered into a PSA with the Government of Guyana,” was outlined.
According to EEPGL, the written laws referred to in the subsection relate to the Income Tax Act; the Income Tax (In Aid of Industry) Act; the Corporation Tax Act; and the Property Tax Act.
The respondent noted that in fact, PART VI of Section 51 (of the Petroleum Act) is headed by the caption: ‘Modification of Tax Laws’.
“Part VI makes provision for the Minister responsible for Finance (not petroleum) to make subsidiary legislation (orders) exempting the application of 4 (four) substantial “Tax Acts” – namely the Income Tax Act, the Income Tax (In Aid of Industry) Act, the Corporation Tax Act and the Property Tax Act,” the company stated.
As such, the added respondent believes that the law can exempt certain persons from the application of a tax Act.