December 25, 2020 Read More →

Costs of Guyana tax exemption outstripping profits from oil deal

Kaieteur News:

The total revenue Guyana received so far from oil exports and royalty is almost at US$150 million since production began last December. However, the country lost a lot more in 2019 due to the huge tax exemptions it granted to oil companies operating on its shores.

Those tax exemptions total a whopping US$600 million. Same was revealed in the Audit General’s report for 2019.

“During the year 2019, the Oil and Gas Sector received tax exemptions totalling $125.849 billion through the Go-Invest and the Geology and Mines Commission (GGMC),” the Audit Report for 2019 noted.

To put that figure into perspective, the magnitude of those exemptions measures up to 37% of Guyana’s 2020 $329.5 billion budget. In addition, the report pointed out too that two companies objected to assessed taxes totalling some $265.626 million.

Guyana will continue along this path of billions being lost in revenue because these very exemptions it granted. For context, instead of allowing ExxonMobil and its partners, Hess Corporation and CNOOC/NEXEN to pay their fair share of Corporate Income Taxes (CIT), Guyana agreed to pay the same on behalf of the contractor from its share of oil profits.

In other words, if Guyana gets $50 in profits and the taxes to be paid to the Guyana Revenue Authority (GRA) amount to $20, it means that Guyana has only gained $30 in profits. If Guyana did not agree to such a provision in the Production Sharing Agreement to begin with, it would have walked away with a total of $70.

Tom Sanzillo, Director of Finance at the Institute for Energy Economics and Financial Analysis, commenting on this very issue had stated that the public is fundamentally being shortchanged when the government pays the income taxes for the company.

Sanzillo who has 30 years of experience in public and private finance, had noted too that in a five-year-period, ExxonMobil would be walking away with US$653 million which it should have paid in taxes. 

[Staff Report]

More: Guyana received US$150M in oil revenues this year but gave away US$600M in taxes for 2019

Posted in: IEEFA In the News

Comments are closed.