By Leonard Gildarie
US-owned Guyana Telephone and Telegraph Company (GTT) has denied using ingenious accounting to evade taxes in Guyana. The issue had been simmering for some time now, with accusations that the company used a number of subsidiaries, transferring funds and paying fees, to reduce its profits.
However, on Tuesday, Chief Executive Officer (CEO), Justin Nedd, sought to put those allegations to rest, insisting that the company is audited in a number of layers, plus it has to adhere to international regulations, as it is traded publicly.
In 2014, the company appeared before the Public Utilities Commission, in an application to increase rates on its landline services. However, the Guyana Consumer Association (GCA), as part of the submissions, fought against any increases, accusing the company, now in its 27th year in the country, as hiding its true profits.
GTT had never publicly defended the charges, until now.
With liberalization of the telecoms sector likely before year-end, the company is locked with Government in critical negotiations.
“What I want to say is tax evasion is illegal. I am an accountant, and as a professional accountant you don’t get to do that. They take your licence…we don’t do tax evasion.”
The CEO noted that the Commissioner General of the Guyana Revenue Authority is also an accountant, with the company audited by local accountants.
“We are also audited by international auditors, PriceWaterhouseCoopers so I would say without reservation (that) those accusations are baseless. I don’t know what else to tell you.”
The official was answering questions during a press conference on the company’s operations.
The company had also been facing questions about alleged large transfers out of profits, with little corresponding investments seen.
It was only last year that the PUC ordered the company to install at least 350 new landlines every quarter as part of the conditionalities for approving new landlines.
GTT and its competitor, Digicel Guyana, have been some of the biggest buyers of foreign currencies. There have been arguments that the profits repatriated were not immediately reflecting an equitable investment in Guyana. These were evidenced by the shortage of landlines and sloth in developing internet accessibility.
Nedd denied that this is so and pointed to the ongoing US$20M ‘Blaze’, which is targeting higher internet speeds using a fibre network.
“I am at a bit of a loss there, we spent US$20M on this fibre optic network… we don’t manufacture much in Guyana, everything we buy has to be in US, Canadian, Euros, almost everything is bought in foreign currency.”
Stressing the need of purchasing large amount of currencies for investments and equipment, the CEO explained that in terms of profits, shareholders need a return on investments.”
“…so it is not unusual for companies to pay dividends. We do not engage in tax evasion, and if we were, the relevant authorities would have a serious conversation with us. We are a subsidiary of a publicly traded company (ATN) and there are a few things that are a no-no.”
According to Nedd, the leaders of the company have to adhere to the Foreign Corrupt Practices Act of 1977 (FCPA), a United States federal law known primarily for two of its main provisions – one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials.
“I’m sure you would’ve seen that Act. Every quarter I have to sign declarations saying the statements are in accordance and there is no fraud…and that is for the Securities and Exchange Commission in the US. The implications are that if we are not forthright and honest about what we send to the US, I can end up in federal prison. Do you want me in federal prison…?”
The GCA has, in its documents to PUC, claimed that GTT attempted to conceal the fact that its landline operations is owed US$90M… monies used to finance the cell phone service.
“GTT started out as a landline operator and its later cellular business was grafted on to what was then its core landline operations. In this process, GTT used about US$60M of funds generated by the landline to invest in the cellular business. No bank loan was taken; landline money was used. With interest accruing at 15% per annum, GTT’s loan from its landline to help expand its cellular phones division would see that former being owed around US$90M.”
The consumer body had also stated that GTT was not telling the whole story as its landline infrastructure – fibre optic and copper lines – is being used to transmit internet and mobile traffic – yet the landline does not receive a cent for the use of its facilities.
With over 20,000 internet customers, this could add up to about US$1.2M annually.
“These monies must be added to the landline revenues,” GCA had said in its arguments to the PUC.
The body also accused GT&T of transferring its fibre optic, undersea cable, to a foreign company in an “involuted” manner. “Whatever was the transaction, there was a huge money value for this cable, a proportion of which must be allocated to landline revenues.”
GT&T had reportedly spent US$30M for the cable – a project it shares with Suriname.
“Gains from depreciation must be credited to landline revenues. The landline assets are old and depreciated and there has been little or no capitalization. The Guyanese consumer pays the 15% rate of return on these fully depreciated assets and since the landline assets book value is nil, it means the company is harvesting super profits on the landline. These super profits monies must be credited to the landline revenues.”
Nedd said Tuesday that GTT is prepared for the scrutiny and is ready for the challenges.
It will be way ahead of the game when other new companies step into the landline, internet and international calls market. For now GTT has, on paper, the monopoly on the three.
Irish-owned Digicel has signaled intentions to land its own fibre for high-speed internet.
Several other companies are also interested in entering the market.
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