Court case over extensive waivers to oil companies…KN Publisher says waivers in direct conflict with petroleum law

Jun 20, 2022 News

– raises issue over Govt. paying taxes for Exxon

Kaieteur News – Kaieteur News (KN) Publisher, Glenn Lall has raised a series of questions in the case he filed against the Guyana (GOG)’s decision to grant extensive tax waivers to Exxon Mobil and its partners.
In a document submitted to the High Court on Lall’s behalf by his attorney, Mohamed R. Ali, the KN Publisher has asked the Court to determine inter alia, whether the acts of the Minister of Natural Resources and certain sub articles of the Petroleum Agreement were in breach of sections 10 and 51 of Petroleum Exploration and Production Act (PEPA) as well as sections of the Financial Administration and Audit Act (FAAA).

Kaieteur News (KN) Publisher, Glenn Lall

In fact, Lall contends that terms of agreement as it relates to taxes contained in the petroleum agreement signed between the GOG and Exxon is in direct conflict with the Petroleum law.
Added to this, the businessman said the GOG did not just grant a waiver, remission or concession, but substituted itself for the agency liable to be taxed. He submitted that the Court should therefore consider whether the GOG can substitute paying taxes for any taxpayer.
As it relates to actions of the Minister of Natural Resources, Lall explained that Articles 15.1, 15.11 and 15.12 of the petroleum agreement which deals specifically with taxation and royalty paid by the oil companies are ultra vires (reaching beyond the powers”) of sections 10 and 51 of the PEPA as they purport to disapply the written laws set out in section 51 (2) to persons other than licensees, namely to Affiliated Companies, expatriate employees of Contractors and non-resident sub-contractors.
It is explained that Article 15. 1 of the petroleum agreement states that no tax, valued added, excise, duty, fee, charge or other impost shall be levied on the contractor or affiliated companies in respect to the income derived from the petroleum operations. Article 51:11 states that there shall be no tax, valued added, excise, duty, fee, charge or other impost applicable on interest payments, dividends, , deemed dividends, transfer of profit or deemed remittance of profits to the contractors affiliated companies or non-resident subcontractor to its foreign or head office or to affiliated companies.
Further Section 15: 12 extends the same favour expatriate employees of the oil companies and its contractors and offers tax waivers on personal income tax under the Income Tax Act of Guyana. According to Lall’s contention, the aforementioned articles trump on the sections 10 and 51 of the PEPA.
While section 10 of the law speaks to the agreement with respect to the grant of licence, section 51 states that “[it is] the Minister assigned responsibility for Finance who 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 subsection (2) shall not apply to, or in relation to, a licensee where the licensee has entered into a production sharing agreement with the Government of Guyana…”
Lall contends further that the GOG prematurely granted the waivers and made decisions on taxes before knowing the details of the oil finds.
“…It is therefore submitted this was not an appropriate case for the scale and range of tax concessions under PEPA should be granted. To the best of the applicant’s knowledge, no government publications have highlighted the justification of the factors the Minister took into account upon signing the Petroleum Agreement,” the newspaper publisher outlined in the document.
Moreover, the applicant said “if the Minister wished to extend fiscal concessions to affiliated companies, sub-contractors and expatriate employees of the contractor, affiliate companies or non-resident sub-contractors this could only have been done by a provision to that effect under a Tax Act.”
He submitted further that “by the use of the word licensee,” Parliament intended that any concessions and waivers could not be extended to non-resident subcontractors, affiliated companies or associated companies.”
“It is our submission that the Minister has clearly acted outside of the provisions of the Act by agreeing to contract terms of the said Petroleum Agreement that unlawfully extend the statutory provisions regarding tax exemptions and concessions to other classes of persons other than the licensee.
It is our further submission that the court’s duty, whether the legislation is a taxing Act or any other legislation is to give effect to the intention of the legislature,” Lall said in the written submission to the Court.
Lall is arguing fiercely to have the government’s decision to grant the concessions overturned by the court. The GOG has already filed a response through the office of the Attorney General defending its decision to grant the tax waivers. Among other things, the government has said that Lall has no right to file the action since the agreement it has with the oil companies is a matter of private law.
In an initial affidavit filed in response to the GOG, the newspaper publisher has been adamant that the concessions given to expatriate employees under Article 15.12(ii) of the Petroleum Agreement are discriminatory of the contractor, affiliated companies and non-resident sub-contractors.
Lall noted, too, based on the advice of his attorney, the issue falls in the category of administrative law, which is considered a branch of public law and not private law.
In a previously sworn document, the Kaieteur News Publisher had noted that the issue deals with the decision-making of such administrative units of government that are part of the executive branch in such areas as international trade, manufacturing, the environment, taxation, etc.