IMF report reveals...Govt. agrees to pay ExxonMobil’s tax out of nation’s share of profit oil

IMF report reveals…Govt. agrees to pay ExxonMobil’s tax out of nation’s share of profit oil

May 07, 2018 ExxonMobil, News

By Abena Rockcliffe-Campbell

While government continues to give the nation the impression as if it will be benefitting from an equal share of profit oil, the truth is, Guyana will be getting much less.
The nation will be made to pay ExxonMobil’s Corporate Income Tax (CIT) to the Guyana Revenue Authority (GRA). This money will come from Guyana’s share of profit oil.
In a technical assistance report that the International Monetary Fund (IMF) handed to the Government of Guyana last year, the regulatory body noted that according to the Guyana Geology and Mines Commission’s published minimum terms, the contractor’s CIT liability is paid out of the government share (also known as pay-on-behalf system). In other words, the government share of profit oil/gas is inclusive of CIT and, therefore, the contractor (ExxonMobil) does not have to make separate CIT payments.
IMF said that since the CIT is included in the government share of profit oil, “this implies a ring-fence around the contract area for CIT purposes.”

Minister of Natural Resources, Raphael Trotman (left) and ExxonMobil Vice President Erik Oswald

The IMF said that while this arrangement is not unique to Guyana, 50 percent is a low share to be given to a government that still has to pay taxes on behalf of the company.
“This type of arrangement is also called post-tax production sharing, as the profit oil sharing is inclusive of CIT. An advantage of this approach is that it provides a measure of fiscal stability for companies, while protecting the government from abusive CIT planning as companies do not gain from engaging in such activities.”
However, the IMF said that “When this type of production sharing is used, usually the government share of profit oil/gas is higher than what the share would be if the contractor were separately liable for CIT. In the case of Guyana, this implies that the fixed 50 percent share is relatively low.” That type of “pay on behalf” arrangement is employed in countries such as Egypt, Qatar, Sudan, Libya and Trinidad and Tobago.
The Production Sharing Agreement (PSA) signed in 2016 between Guyana, ExxonMobil and its partners says, “The Contractor shall provide the Minister with the Contractor’s Income Tax returns to be submitted by the Minister to the Commissioner General, Guyana Revenue Authority so the Minister can pay income tax on behalf of the Contractor as provided under Article 15.4 (a).”
It continued, “On such returns, the Minister shall note that he is paying the income taxes on behalf of the Contractor, so that the Commissioner General, Guyana Revenue Authority can properly prepare the receipts required under this Article 15.5. Within one hundred and eighty (I80) days following the end of each year of assessment, the Minister shall furnish to the Contractor proper tax certificates in Contractor’s name from the Commissioner General, Guyana Revenue Authority evidencing the payment of the Contractor’s income tax.”

Discover more from Kaieteur News

Subscribe to get the latest posts sent to your email.

Latest News