Jun 24, 2022 Editorial
Kaieteur News – Guyana’s Vice President, Bharrat Jagdeo, is having a wonderful time with the issue of royalties on this country’s oil. The question is whether ExxonMobil is cheating Guyanese of their paltry royalty percentage, while leaders sleep the sleep of the unconcerned. While the issue rages, Dr. Jagdeo has been leading this country on a real dance, with fancier moves daily. The reality is that we have proceeded from a royalty runaround to a royalty rhumba. We now examine his slick moves now tripping him up.
In his last Tuesday press conference, this is what Dr. Jagdeo was clear on the royalty issue” “I can say definitively…royalty is not cost deductible, but…are GRA tax deductible but they don’t come out of the cost bank so the contractor has to pay its share.”Studying this answer, it is clear that Dr. Jagdeo has failed aspirations with the English Language, and practices the identical word games that his learned colleague, Dr. Roger Luncheon, transformed into a local art form.
All along, the inquiries and exchanges were about whether the royalties were part of Exxon’s cost that could be recoverable. Somehow, Dr. Jagdeo saw it fit to attempt to pull the wool over Guyanese eyes by speaking of this creature called “deductible.’’ It is how he deceives the naïve and gullible, and gets away with such longstanding practices. Clearly, foreign spin doctors are guiding him on how to trick citizens with his word games. But that aside, the Vice President is on record as saying that “royalty is not cost deductible.”
Now we are scrutinizing Exxon’s Guyana subsidiary (EEPGL) Profit and Loss statement for 2020-2021, and there it is in black and white. The seventh line under “Expenditures” identifies “Royalties” as part of the total of that heading. However described, expenditures represent what was spent, hence it is an expense, meaning, a cost. Twist or turn, royalty is there in EEPGL’s Profit and Loss statement for 2020-21, and contributing to its “Total Operating Expenditures (line 8)”, which reduces oil revenues to profit (or loss) before taxes. So, let us tell this nation where this leaves everybody. The profit is lower because of royalty deduction, which impacts our share of that same profit.
Exxon’s own P&L statement confirms that royalty is listed as an expense/cost, and that it subtracts from the oil revenues recorded, making for a reduced profit number by the equivalent of royalty amount deducted. For the Hon. Vice president, therefore, to attest that “royalty is not cost deductible” is his handing out a six and labeling it a nine, which is now part of his ever-growing bag of tricks. Instead of making rings around Guyanese with this dance of his, he only digs a deeper hole for himself. He did also state on the record that royalty is “GRA tax deductible. “Essentially, Exxon is ‘recovering’ what it gave as royalties under the tax deduction umbrella. It is taking it back using another route.
In EEPGL’s P&L statement, taxes are zero. Additionally, most Guyanese know by now that this country pays the entire bill for any taxes that Exxon owes; the company has real tax exempt status. In this context, royalty being “GRA tax deductible” means nothing, other than perfuming this smelly royalty story. Moreover, Exxon is given a receipt by Guyana for taxes that may have been hypothetically due (using its P&L numbers), but which it didn’t pay a dime. The farce and fraud continue with Exxon now well-positioned to present a receipt from Guyana to the United States tax collection agency (the IRS) and use it to lower its corporate taxes due in the US. The company gets a deduction for something that is of scheming and the imaginary.
For Exxon, it is benefit (cost recovery/deductible) upon benefit (tax exemption) upon benefit (receipt for US tax purposes) from its Guyana operations. As for this country, it is tricked, cheated, robbed, where collections are concerned, even with the tiny royalty. Talk about Exxon robbing babies, widows and orphans, the disabled, and the vulnerable, and it is all happening here. The ugly irony is that Vice President Jagdeo is Exxon’s best ambassador and agent on royalty, and not even a secret one anymore.
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