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Exxon’s taxes increase globally, but enjoys tax-free ride in Guyana
President Irfaan Ali
Kaieteur News – United States oil giant ExxonMobil Corporation has reported an increase in its income tax expenses for the second quarter of 2024, with the figure rising to US$4.1 billion, up from US$3.5 billion in the same period last year.
The company’s total tax bill for the quarter stood at US$11.6 billion. However, none of this tax was paid to Guyana, where ExxonMobil continues to enjoy a tax-free status under its existing agreements. ExxonMobil’s effective income tax rate, calculated based on consolidated company income taxes and its share of equity company income taxes, was 34%, up from 33% in the previous year. “This increased from the 33% rate in the prior year period due primarily to a change in mix of results in jurisdictions with varying tax rates…” Exxon said.
Recently, Exxon announced its earnings of US$9.2 billion for the second quarter of 2024. The company’s Chief Executive Officer (CEO), Darren Woods attributed Exxon’s profits to their operations in Guyana and said that, “We achieved record quarterly production from our low-cost-of-supply Permian and Guyana assets, with the highest oil production since the Exxon and Mobil merger. We also achieved a record in high-value product sales, growing by 10% versus the first half of last year.”
“We delivered our second-highest 2Q earnings of the past decade as we continue to improve the fundamental earnings power of the company. We closed on our transformative merger with Pioneer in about half the time of similar deals. And we’re continuing to build businesses such as ProxximaTM, carbon materials and virtually carbonfree hydrogen, with approximately 98% of CO2 removed, that will create value long into the future,” Woods said. ExxonMobil Guyana Limited (EMGL), a subsidiary of Exxon, disclosed in June that it earned approximately US$2.9 billion in profits last year—entirely tax-free.
Chief Executive Officer of ExxonMobil, Darren Woods
ExxonMobil Guyana is the operator of the Stabroek Block with a 45% interest, while Hess Guyana Exploration Ltd. holds 30% interest and China National Offshore Oil Corporation (CNOOC) Petroleum Guyana Limited holds 25% interest. The block-partners enjoy a tax-free ride in Guyana owed to the 2016 Production Sharing Agreement (PSA), Exxon signed with Guyana back in 2016.
The oil deal provides for taxes owed by the company to be paid by Guyana. The PSA states at Article 15.1 that the Contractor (ExxonMobil Guyana Limited) as well as its affiliates shall not be subjected to tax, value-added tax, excise tax, duty, fee, charge or impost in respect of income derived from petroleum operations, property held or transactions except as specified under the agreement.
It goes on to state at Article 15.4 that the sum equivalent to the taxes owed by the company will be paid by the Minister responsible for Petroleum to the Commissioner General of the Guyana Revenue Authority (GRA). Notably, the GoG also agreed to issue a receipt to ExxonMobil, indicating that it has met the local tax requirements to avoid the burden of double taxation.
Article 15.5 of the contract states, “Within one hundred and eighty (180) days following the end of each year of assessment, the Minister shall furnish to Contractor proper tax certificates in Contractor’s name from the Commissioner General, Guyana Revenue Authority evidencing the payment of the Contractor’s income tax under the Income Tax Act and corporation tax under the Corporation Tax Act. Such certificates shall state the amount of tax paid individually on behalf of Contractor or parties comprising the Contractor and other particulars customary for such certificates.”
Also, the Government of Guyana (GoG) has explicitly stated that due to the sanctity of contract the 2016 PSA will remain in place, despite the deal being labelled as lopsided, benefitting the oil companies more. Notably, a legal suit brought against these abusive tax giveaways by the Publisher of this newspaper, Mr. Glenn Lall was unsuccessful as the Court dismissed the case in February 2023.
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