‘We must stop tax giveaways to oil companies’ – AFC

Feb 25, 2023 Court Stories, Features / Columnists, News

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…disappointed in outcome of Court case

Kaieteur News – The Alliance For Change (AFC) believes that the excessive tax waivers being granted to oil companies operating in Guyana must cease.

During the party’s first press conference for the year on Friday, Leader, Khemraj Ramjattan said he was disappointed that the court case challenging the tax giveaways to oil giant ExxonMobil and its subcontractors was defeated.

That case was filed by Publisher of Kaieteur News, Mr. Glenn Lall in January 2022 to reverse the excessive tax waivers being granted to persons other than licensees, which violate the Petroleum Exploration and Production Act (PEPA),  and the Financial Administration (and Audit) Act.

Ramjattan in an invited comment Friday said, “I am disappointed by the decision, I thought that Glenn was going to win it. I knew it was going to be a very difficult case…indeed if we had won it we would have certainly gotten some more revenues in the form of taxes which were exempted and waived.”

He went on to explain that at the time the contract was signed in 2016 under the A Partnership for National Unity coalition with the AFC, the then administration believed it was in line with the regulation that allows pioneering industries to be tax free for the first five years of existence.

When he was asked if he regrets making the decision to grant the tax waivers however, the AFC leader noted, “Nope, I do not because indeed it seems the law is now vindicating us. What I wanted to say here is that to get that great decision signed up it was an important thing that we take all of these things into consideration.” Ramjattan said due to this agreement, Guyana is now earning significant revenue from a new generation stream.

At the same time, he said when the losses from the tax waivers are considered today, the AFC believes that the tax provisions in the Stabroek Block agreement must be renegotiated in the future.

“There are changed circumstances (in the Stabroek Block); when we signed up it was about four billion barrels, it is 11 billion barrels now and we had signed up in relation to that one Liza arrangement and said that we are going to change certain (provisions) as we go along,” Ramjattan said.

Court challenge

High Court Justice Nareshwar Harnanan on Wednesday handed down a ruling that affirmed the legality of the government’s decision to hand extensive tax waivers to Exxon Mobil and its affiliates. For his part Lall is already contemplating filing an appeal.

In his application, Mr. Lall had contended among other things, that many of the provisions listed under Article 15.1 of the Petroleum Agreement, dated June 27, 2016 between the GOG and the oil companies, grant exemptions to persons other than licensees, which violate the Petroleum Exploration and Production Act (PEPA),  and the Financial Administration (and Audit) Act.

Lall  had specifically flagged paragraph 2 of Article 15.10 of the Agreement which states: “Notwithstanding any provision to the contrary in this Article, Affiliated Companies or Non-Resident Sub-Contractors shall not be subject to the provisions of the Income Tax Act (Cap 81:01) and Corporation Tax Act of Guyana (Cap 81:03) during the expiration period on income earned in Guyana for any given tax year if the affiliated company or non-resident Sub-Contractors has conducted business for one hundred eighty-three (183) days or less on a cumulative basis in the tax year of assessment.”

As such, the newspaper publisher had requested declarations from the Court that the provisions are unlawful, null and void, and of no legal effect.

However, Justice Harnanan said the minister is vested with the power under Section 51 of the PEPA and the Petroleum (Exploration and Production) (Tax laws) to grant EEPGL, CNOOC Nexen Petroleum Guyana Limited, and Hess Guyana Exploration Limited, all companies that are parties to the case, concessions of extensive tax exemptions.

It was reported that due to this provision in the contract Guyana gave away more tax waivers than the revenue it earned in 2021 from the sector. 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’s report for 2021. The report for 2022 is not yet available. 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.

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• AFC, ExxonMobil, PSA, renegotiated, taxes

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