Latest update September 6th, 2026 7:34 PM
Guyana has to look after its own interests
Kaieteur News – The local news is awash with the story of three US senators taking an interest in Exxon’s taxes. But what really is all the fuss about and are these senators looking out for America’s or Guyana’s interest?
Let us start with the beginning. Back in 2016, ExxonMobil, along with its partners Hess (which has since been bought by Chevron) and China’s CNOOC, signed a deal with the government of Guyana. They truck literal gold—black gold—in a massive offshore area called the Stabroek Block. The deal, known as a Production Sharing Agreement (PSA), is incredibly lucrative for the companies but represents a major missed opportunity for Guyana. In short, Guyana was shagged under the agreement.
A key feature of this PSA was the tax holidays granted to the oil companies. In plain English, the contract says Exxon and its partners don’t have to pay corporate income taxes to Guyana on their profits from the oil. Instead, the country gets paid through a different route: a share of the profits and a small royalty. But here’s the accounting magic trick: Even though Exxon doesn’t actually cut a check to Guyana for taxes, the Guyanese government gives the company a tax receipt. This receipt says, essentially, “Yep, Exxon’s tax obligations here are met.” Why would they do that? It’s a common practice to avoid what’s called ‘double taxation’—being taxed on the same income by two different countries.
This is where the U.S. tax code comes in, and what the US senators are concerned about. The U.S. has a policy called the “foreign tax credit.” If an American company pays income taxes to a foreign government, it can claim a credit against its U.S. tax bill. The idea is to prevent double taxation and encourage international business. Fair enough.
The problem is a loophole that blurs the line between a ‘tax’ and a ‘payment for a service’. Buying the right to drill for oil is an economic benefit, like leasing a building. It’s not an income tax. But current rules are fuzzy, allowing companies to potentially classify these kinds of payments as taxes eligible for that valuable U.S. tax credit.
In their letter to ExxonMobil’s CEO, the senators put it bluntly: “Payments to a foreign government in exchange for an economic benefit [like the right to extract oil] are not considered taxes at all.” They argue that Exxon might be using the tax receipt from Guyana—a receipt for a tax it didn’t actually pay—to claim a foreign tax credit from the U.S. Treasury. If true, this would artificially lower Exxon’s U.S. tax bill on its massive Guyanese profits. The senators frame this as a question of fairness: “We are concerned about the possibility that American taxpayers may be subsidizing ExxonMobil’s foreign oil production, which they do in partnership with a Chinese state-owned company.”
The numbers involved are staggering. It is estimated that it would save the United States taxpayers US$71.5 Billion to close this loophole a period of over ten years. It is estimated also that Guyana has lost US$10B tax revenue from this deal since 2019, according to reports from the country. It is also being contended that, first, U.S. rules might be subsidizing a highly profitable company. Second, that company is drilling in partnership with CNOOC, a firm owned by the Chinese government—a strategic competitor.
ExxonMobil defends its arrangement. It says that Guyana is receiving getting its share of revenue through the profit-sharing and royalty model. He says that while it’s not labeled “tax” in the contract, in effect it is the same. It is payments to the state.”
The senators aren’t buying it. They’ve given Exxon until October 2025 to answer detailed questions about its U.S. tax filings related to the Guyana deal. The core of this issue is a classic debate: Are complex tax rules simply smart business, or are they an unfair loophole that shifts burden onto everyday citizens? But Guyanese must not be lulled into believing that its interests are being protected by these inquiries by the senators. No. this is about the US and its tax laws.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)
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