Feb 16, 2021 News
Public consultation on local content policy:
By Kemol King
Kaieteur News – Tax administration in the local oil industry has been a sore point for years, mainly because a blanket waiver on all taxes for ExxonMobil, its partners and sub-contractors in the Stabroek block petroleum agreement, has cut off what would have been a substantial revenue stream for Guyana. Another side effect of this waiver, of concern for local businesses, is that it causes local businesses to compete on an uneven playing field with foreign suppliers.
This is the case for Guyana Oil & Gas Support Services (GOGSS), a joint venture between National Hardware (Guyana)’s Nicholas Deygoo-Boyer and Concepts & Services (Trinidad & Tobago)’s Damion Jordan. The venture established a welding and fabrication facility, with local welders and fabricators trained and up-skilled in Trinidad and Tobago, building equipment for the oil sector. The company had to secure American Welding Society (AWS) certification for the type of structural welding needed for the oil sector.
Boyer noted that the steel GOGSS stocks, is unlike what Guyana is accustomed to.
“In a country like Guyana,” he said, “we have traditionally stocked steel for buildings and the sugar industry – plates thicker than about an inch or an inch and a half. We had to get plates that are about two inches thick to basically make this framework. And we had to import that from the nearest stocking point, which was Trinidad. I paid value added tax on that steel coming in.”
Boyer addressed the opening day of consultations on the draft local content policy, telling a room of government officials and oil industry executives that his business has had to absorb Value Added Tax (VAT) expenses into his margins because the operator would not foot the cost, something that his foreign competitor has not had to contend with.
This issue drives home the importance of better tax administration, Boyer told the gathering at the Arthur Chung Conference Centre (ACCC).
“One of our first projects that we embarked on,” he said, “we had to absorb the 14 percent VAT because the sub-contractor that we were supplying to basically used the PSA [Production Sharing Agreement] and said based on the PSA, that [for] this specific equipment, we do not pay VAT. I had to absorb that into my margins because my nearest competitor regionally wouldn’t pay VAT on export, and then the operator wouldn’t pay VAT on imports. So I had to adjust both my pricings as well as absorb any VAT I paid on materials, particularly steel.”
The tax administration, Boyer posited needs to have a way of dealing with startup companies in the industry, since his company has been made to pay a tax that competitors don’t – VAT.
Boyer, who is also Chairperson of the Private Sector Commission (PSC), said that an established contractor had spoken of how impressed he was with local potential to grow in steel-working, with the right nurturing.
“It’s fun to see these Guyanese who people would have said can’t participate in the industry… beat the expectations… break the mould and be the first to say ‘Look, we did it. We became certified. We can do this. We are ready to take on this industry’,” Boyer had told reporters on the sidelines of Guyana International Petroleum Exhibition (GIPEX) 2019.
The businessman said yesterday that critical to considerations around improving local content, is tax administration.
While he did not speak definitively on a solution to this issue, Vice President, Dr. Bharrat Jagdeo, noted on the topic of taxes, that businesses located in certain regions already benefit from tax concessions, and that that mechanism could be extended for the oil and gas industry.
He said that the issues raised yesterday and throughout the one-month long consultation, are under consideration and will be addressed.
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