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Did Guyana really pay $2.8 billion to itself on behalf of oil companies – and issued tax receipts?
Editor:
I have copied the (below) table from the OGGN’s letter, published in SN, February 16th. This table contains some important data and raises a few questions that require answers from the Minister of Petroleum, Vickram Bharat.
Note:
(1) Guyana’s share of revenues (same thing called total sales) for the years 2020 -2023 remain fixed at 14.5% (Profit-share 12.5% + 2% Royalty). As Capex (Capital Outlays) is paid down, Guyana’s share of revenues is supposed to rise. That is not happening. Over the life of the project, Guyana’s share of revenues is supposed to average 55% of total revenues. It is supposed to work like your home mortgage amortization table – as you pay down the loan with each monthly/yearly payment, the equity rises.
(2) Guyana received a total of $3.6 billion over 4-years of operation and (supposedly) paid out $2.8 billion to cover profits’ tax of Oil Companies (same thing called corporate income tax), leaving Guyana with a net oil revenue of $0.8 billion (or $800 million).
Could Minister Bharat explain how he was able to effect payment of the Oil Companies profits’ tax, $2.8 billion – from where did he get the money and to whom did he make the payment? Of course, Tax Receipts were issued to the Oil Companies. And, the numbers on these TRs showed up as Tax Deductions on the income statements of OCs, thanks to Chris Ram’s diligent accounting work.
Let me hasten to add, my questions for Minister Bharat were meant to be rhetorical questions – they were made to make a point. And, the point is that all of this is simply hocus-pocus. A govt cannot use its own money to make payment to itself, on behalf of Oil Companies. Even if it is so written in the Contract.
As Commissioner Statia of Guyana Revenue Authority declared (to paraphrase), ‘no money is received – debit and credit entries are made on accounts belonging to the govt – and Tax Receipts are duly issued to Oil Companies to satisfy compliance with the Oil Contract’.
Article 15.4 (of the PSA) says: “An appropriate portion of [Guyana’s] share of profit oil” must be set aside to pay OC’s profits’ tax. It is hard to believe an oil-host country is asked to pay OCs profits’ tax out of its share of profit oil. But Ripley’s believe it or not – it is so written in Art 15.4.
Art 15.5 states, “The Contractor [Exxon] shall provide the Minister (Vickram Bharat) with the Contractor’s income tax returns to be submitted by the Minister to the [GRA] so the Minister can pay income tax on behalf of the Contractor”. This is more than a case of making both the minister and GRA’s Commissioner the scapegoat – it is at once so much tortured language, deception and trickery.
Art 15.5 further states, “On such returns, the Minister shall note that he is paying the income taxes on behalf of the Contractor so that [GRA] can properly prepare the [Tax] receipts required under this Article 15.5”.
It is crystal clear Oil Companies (Exxon, Hess, Cnooc) do not pay tax on profits made in Guyana – but collect Tax Receipts. What they do with the Tax Receipts is another matter. Govt of Guyana issues the Tax Receipts – because it wants to be compliant with what is written in the Production Sharing Agreement, otherwise known as the Oil Contract.
It is time all people of conscience and Influencers (former Secretary of State Mike Pompeo, Sir Paul Collier – now in Guyana for the Energy Conference) lend their voices to redress this blatant duplicity in the PSA – call on both GoG leaders as well as Exxon’s CEO to agree to revise the Tax Article.
The bottom line here: Oil Companies do not pay tax on profits made in Guyana – but collect Tax Receipts. On the basis of these TRs they take tax deductions on their Income Statements, and further most likely claim Tax Credits on their U.S. corporate Tax Returns.
Mike Persaud
(Did Guyana really pay $2.8 billion to itself on behalf of oil companies – and issued tax receipts?)
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