Given the current state of affairs… Guyana would lose out significantly in tax avoidance issues with oil companies – Dr. Mangal

Jul 07, 2018 News

By Kiana Wilburg
Former Presidential Advisor on Petroleum, Dr. Jan Mangal has no confidence in Guyana’s current ability to protect the nation from the tax avoidance tricks of oil companies. Given the country’s state of affairs and low oil and gas expertise, the consultant said that the nation is likely to lose out much more than other countries in such matters.

Former Presidential Advisor on Petroleum, Dr. Jan Mangal

In an interview with this newspaper, the former Presidential Advisor said that oil companies are very skilled at tax avoidance and spend millions on lawyers and accountants in setting up companies around the world to reduce their tax liability.
Dr. Mangal said that such a situation might be viewed by some countries as illegal. He stressed, however, that it is up to countries to have a similar level of skills and resources set aside to determine what constitutes illegal tax avoidance. Dr Mangal said this is necessary to ensure that the country does not lose out. In Guyana’s case, the consultant said, “We have put probably minimal resources towards aspects of oil and gas.”
The former Presidential Advisor said, “If you look at the Ministry of Natural Resources, in the last three years, there isn’t a single full time oil and gas professional there. And when I say an oil and gas professional, it would have to be a foreign expert with 20-plus years of applicable experience. You aren’t going to find many Guyanese with the relevant experience.”
He added, “With regard to tax, the Guyana Revenue Authority (GRA) and the Ministry of Finance, they have been receiving a lot of help from the International Monetary Fund (IMF) and others, but I doubt they have any oil and gas tax experts, full time and on long term contracts there, developing the polices and the framework to address tax avoidance in the oil sector. Even the leaked IMF report, you may recall, it speaks to Guyana needing to focus on tax avoidance.”
Further to this, Dr. Mangal was reminded that GRA has said on several occasions that it would be able to put certain measures in place to prevent tax avoidance tricks by oil companies. But the former Presidential Advisor said that given what has taken place with ExxonMobil and Australia, it is hard to believe that Guyana would do any better.
Dr. Mangal said, “All countries struggle with tax avoidance issues. But for a country like Guyana which is not so developed to be faced with the same (tax avoidance), then Guyana is likely to lose out much more than these other countries. So I don’t have much confidence. If I have to bet, then I wouldn’t bet that Guyana would be getting the upper hand.”
EXXON AND AUSTRALIA
USA oil giant, ExxonMobil has faced several allegations over its tax affairs in Australia. In fact, the company has not paid corporate tax since 2013 and does not expect to do so until 2021.
ExxonMobil says it is caught in a set of unique circumstances – caused by a large expenditure on capital investment and falling prices – which have left it without a taxable income. But a recent report by the Tax Justice Network exposed the links between the company’s Australian operations and tax havens in the Bahamas and the Netherlands.
Details have also emerged from a Senate inquiry into corporate tax avoidance showing the company has spent a considerable amount on legal disputes with the Australian Taxation Office (ATO).
In response to a question on notice, ExxonMobil estimated it had spent $10m on legal costs in the past 10 years relating to ATO cases. It said the “bulk” of that money had been spent on disputes over the petroleum resources rent tax, which were “fully resolved by 2013”.
Tax Justice Network’s Jason Ward said the figure showed Australian taxpayers were footing the bill for legal battles with ExxonMobil, while the company itself paid little tax.
Ward wrote the Tax Justice Network report that alleged the company used a complex web of subsidiaries and related party loans to shift profits and minimize tax.
“Exxon’s ability to extract our resources and exploit Australian workers while paying minimal tax is already widely known,” Ward said. “What we did not know is that Exxon has spent at least $10m fighting the ATO to keep it that way.
“Exxon has barely paid a cent in corporate income tax since 2011 and won’t pay for years to come, but Australian taxpayers have had to foot the bill to fight them in court.”
(See link for full article: https://www.theguardian.com/business/2018/jul/03/exxonmobil-spent-10m-fighting-australian-tax-office)