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Guyana waives US$1B in taxes to oil companies in 2021, while earning only US$633M
By Davina Bagot
Kaieteur News – The Guyana Revenue Authority (GRA) at the end of the fiscal year 2021 granted a total of $266.774 billion in tax waivers with a whopping $203.8 billion alone to the oil and gas sector or 78.3 percent of all tax exemptions granted for the year.
This information is contained in the Auditor General latest audit report, released only this week. Notably the tax waivers also amount to more than what the country gained in revenue from the oil sector during the same period. According to the Natural Resource Fund (NRF) Summary, as at December 31, 2021 the total balance was $126,694,310,000 billion (US$633.47M); while the total tax waivers for this period amounted to US$1.019 billion.
Chart depicting tax exemption granted to oil companies since 2015. Highlighted is the total waivers granted for last year.
According to the report, “Exemptions from duties and taxes totalled $266.774 billion for the period under review as compared to $137 billion in 2020. This represents an increase of $129.774 billion or 94.78% over the corresponding period.”
It was also explained that the value of the foregone revenue represented 97 percent of total collections by the Authority. The tax body at the end of 2021 collected the sum of $242.091 billion. Tax Chief, Godfrey Statia in response to the AG’s findings said that the agency’s “role with the exemptions regime is administrative and hence to administer the various conduits through which concessions are granted. These concessions are etched in law and/or policies and are non-discretionary on the part of the GRA.”
In fact, the tax body reminded that Mr. Statia had stated his preference for the removal of the concession regime which should be replaced with a tax credit system, as practised in developed nations which could allow for improved compliance with the tax laws and the conditions of Investment Agreements (IA).
GRA also pointed out in its response that, “total exemptions have over the year experienced marginal increases, and in some years comparatively decreased when exemptions/concessions which were granted to the oil and gas sector are excluded. The table below also shows that from 2019 to 2021, the oil and gas sector accounts for, on average, 75% of total exemptions.”
In the meantime, the revenue agency reminded that exemptions in the oil and gas sector are as a result of the Production Sharing Agreement (PSA) between the companies and the government of Guyana. In fact, GRA again warned that these tax waivers will “increase exponentially” as both production and exploration activities are amplified in the Stabroek Block and others in the Guyana basin.
Members of civil society have been protesting the lopsided agreement with the oil companies for its onerous provisions to the country.
In fact, Publisher of this newspaper, Mr. Glenn Lall has filed a case in Guyana’s High Court, which challenges some of the most repressive tax provisions of the Stabroek Block PSA.
The case which was prepared and filed by his Attorney-at-Law, Mohamed R. Ali, outlines that many of the provisions listed under Article 15.1 of the Petroleum Agreement, dated June 27, 2016 between the Guyana Government and the oil companies, grants exemptions to persons other than licensees, which violate the Petroleum Exploration and Production Act, the Financial Administration (and Audit) Act, the Prevention of Discrimination Act, and the Constitution.
In light of this, Lall through his lawyer, contends that the provisions are unlawful, null and void, and of no legal effect. With respect to violations of the Petroleum Law, Lall contends that this occurs at Article 15.1 of the oil contract which states: “…no tax, value-added tax, excise tax, duty, fee, charge or other impost shall be levied at the date hereof or from time to time thereafter on the Contractor or Affiliated Companies, in respect of income derived from Petroleum Operations or in respect of any property held, transactions undertaken or activities performed for any purpose authorised or contemplated hereunder …”
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