Latest update January 12th, 2025 2:25 AM
Feb 26, 2023 News
By Renay Sambach
Kaieteur News – 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.
The decision comes almost one year after Kaieteur News Publisher Glenn Lall filed a court challenge to the Government’s right to grant the massive tax exemptions. For his part, Lall is already contemplating filing an appeal. The court is expected to assess cost that the publisher is likely to pay lawyers of the oil companies.
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.
In his ruling 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.
He said: “This court is of the view that the law empowers the Minister with the responsibility for Finance to issue an order exempting certain laws (Income Tax Laws) from applying to a licensee who has entered into a production sharing agreement with the government.”
Further, he added that “the exemption applies directly and indirectly to the licensee and anyone else in relation to their dealing with the licensee.” Justice Harnanan noted that subcontractors and affiliates have a necessary and indispensable role in the exploratory efforts of the oil companies.”
He explained that the idea of oil companies is often exaggerated; since the companies themselves may never own or operate drilling rigs and seismic operations– they rely heavily on the subcontractors to get the job done. As such, the judge concluded the tax exemptions rightfully extends to “sub-contractors, expatriate employees and affiliated companies are often the ones that actually carrying out the major functions of the oil companies.
“There has been a growth in so called virtual companies which in some cases do not even have offices… contractors carry out all or most of the work themselves…”
Additionally, he noted that Minister of Finance who was at the time Winston Jordan acting on behalf of the A Partnership for National Unity+ Alliance For Change (APNU+AFC) had intended to extend the waivers to these subcontractors and affiliates. Outside of upholding the tax exemptions, the judge noted that Lall was within his right to move to the courts given the public interest in the matter. Though, the publisher initially filed the case under the private law, the court used its discretion and converted the matter to one of judicial review. The court also set aside any contentions over supposed undue delay raised by the lawyers of the oil companies, citing the importance and magnitude of the case. Both the government and the oil companies had fiercely defended the case.
Exxon Mobil’s Subsidiary Esso Exploration and Production Guyana Limited (EEPGL) had contended that Lall stepped outside his boundary when he moved to the High Court to challenge the Government of Guyana’s decision to grant extensive tax waivers to the oil operator and its affiliates.
The oil subsidiary raised several contentions for the court’s consideration including whether the agreement between the Government of Guyana (GoG) and ExxonMobil are subject to the principles of private law or public law; whether the acts of the Minister of Natural Resources and certain sub-articles of the Petroleum Agreement were ultra vires and in breach of sections 10 and 51 of Petroleum Exploration and Production Act (PEPA), sub-sections 1A and 1B of section 6 of the Financial Administration (and Audit) FAA; and Whether upon its proper interpretation the PEPA permits the payment of taxes due on behalf of licensees.
In its submission, the Exxon oil subsidiary outlined a number of grounds in which it contends is valid enough for the court to toss out Lall’s application. Further, the oil company reasoned that for the court to entertain declaratory relief in private law proceedings, the applicant [Lall] must show an act or omission had infringed or threatened to infringe any right of the applicant derived from private law.
Meanwhile, Senior Petroleum Coordinator Gopnauth Bobby Gossai Jnr. in his response on behalf of the government had noted too that Lall failed or neglected to show how he was directly affected. He claimed too that the newspaper publisher misconstrued the matter as his case only addresses the issues of waiver of taxes and makes no mention of remission of taxes by the Government on behalf of licensees. “…Lall failed to show the nexus as to how Section 49 of the Petroleum Exploration and Production Act violates Section 6 of the Financial Administration and Audit Act…” he added.
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