Kaieteur News – The onerous Production Sharing Agreement (PSA) Guyana signed with U.S oil major, ExxonMobil and partners has placed Guyana in a position where it is waiving billions in taxes, but earning less than it has given away.
Since production activities commenced in Guyana in December 2019 on Guyana’s first Floating Production Storage and Offloading (FPSO) vessel- Liza Destiny- the country began losing massive resources to the oil companies. The PSA states at Article 15.1 that the Contractor (ExxonMobil Guyana Limited) as well as its affiliates shall not be subjected to tax, value-added tax, excise tax, duty, fee, charge or impost in respect of income derived from petroleum operations, property held or transactions except as specified under the agreement.
It goes on to state at Article 15.4 that the sum equivalent to the taxes owed by the company will be paid by the Minister responsible for Petroleum to the Commissioner General of the Guyana Revenue Authority (GRA). A legal suit brought against these abusive tax giveaways by the Publisher of this newspaper, Mr. Glenn Lall was unsuccessful as the Court dismissed the case in February of this year.
An analysis done by Kaieteur News of the tax exemptions granted between 2019 and 2021, utilizing the Auditor General (AG) Reports show that a whopping US$2.3 billion in taxes were waived to Exxon and other oil companies operating here, while the country only earned US$932 million. This means Guyana lost more than two times the revenue it earned in tax waivers.
According to the AG report, a total of US$600 million in tax exemptions were granted to the oil companies in 2019. That same year- in December- Guyana commenced oil production and registered an earning of US$150 million.
In 2020, the report highlighted that another US$685 million in tax waivers were granted while Guyana earned a meager US$149 million during the period.
Meanwhile, in 2021, the AG report stated that the tax exemptions grew to just over US$1B, while revenues from the sector only amounted to US$633 million. This means the total tax waivers to oil companies in the three years totaled close to US$2.3 billion and revenue flow to the Natural Resource Fund (NRF) only amounted to US$932 million between 2019 and 2021.
The report by Auditor General, Deodat Sharma for the year 2022 has not yet been made public. It is likely however to be consistent with the previous years in which tax exemptions supersede the country’s oil revenue.
IMF urges countries to cut tax breaks to oil companies
In September, this newspaper reported that the International Monetary Fund (IMF) in a 2023 report has urged countries to cut back on concessions granted to oil companies as fossil-fuel subsidies surged to a record US$7 trillion in 2022.
The bank said as the world struggles to restrict global warming to 1.5 degrees Celsius and parts of Asia, Europe and the United States swelter in extreme heat, subsidies for oil, coal and natural gas are costing the equivalent of 7.1 percent of global gross domestic product. That’s more than governments spend annually on education (4.3 percent of global income) and about two thirds of what they spend on healthcare (10.9 percent), the IMF said in the article written by its staff Simon Black, Ian Parry, and Nate Vernon.
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