Latest update November 14th, 2024 8:42 PM
Oct 13, 2024 News
…says when prices are high, royalty and profits give Guyana more than regular taxes
(‘Guyana’s 2% royalty make up for taxes not paid by ExxonMobil Former President and Prime Minister, Samuel Hinds reportedly said).
Kaieteur News – After attracting criticisms for his first letter encouraging Guyanese to rejoice over the paltry proceeds from its oil resources, Former President and Prime Minister, Samuel Hinds in another missive has presented arguments defending the non-payment of taxes by American oil giant, ‘Guyana’s 2% royalty make up for taxes not paid by ExxonMobil Former President and Prime Minister, Samuel Hinds said.
In his 1300-words missive to the editor on Saturday, Hinds, Guyana’s Ambassador to the United States continued the discussion on Kaieteur News’ article ‘Guyana should have received US$10B from oil to date but only received US$4.4B’.
He said it is likely that the money lost is related to taxes waived and the lack of ring-fencing. Hinds however noted that contracts usually make it explicit that royalties and other payments to the Government would be received in the place of taxes.
“Firstly, when it is said that our government has to pay Exxon’s (the Consortium’s) taxes, our government does not have to take money from elsewhere to pay the taxes waived. There is usually a paragraph in such agreements that say that royalties and other payments to the Government would be received in the place of taxes,” the Ambassador said. He therefore noted that it would be interesting to know whether Guyana is receiving more from its royalty and profit share than it would have gained from regular taxes.
At the end of June 2024, the Natural Resource Fund (NRF) had a total of US$4.8B deposited, inclusive of profit and royalties.
Between the same period however, Guyana lost almost the equivalent to what it gained. Over US$4.3B in taxes were lost during that time. It was reported that during the period 2019 to 2021 US$2.3B in taxes were lost; another US$540M in lost taxes were recorded in 2022 followed by US$1.5B in 2023.
Recognizing that revenue from the sector is dependent on the market price for oil at the time, the former Prime Minister pointed out, “When prices are high, the royalty and profit share easily give us more than regular taxes; when prices are low taxes would have given more, but the operation might soon not be able to cover its costs and stay sustainable.”
Guyana’s oil deal has often been criticized for its lopsided terms which highly favour the oil and gas companies. Instead of renegotiating the Exxon deal, the government of Guyana crafted a new Production Sharing Agreement (PSA) which will not apply to the Stabroek Block.
Presently, Exxon pays a meager 2% royalty to Guyana and takes 75% of the monthly revenues to recover its investments. The remaining 25% is then split with Guyana as profits. Notably, Exxon and its sub-contractors enjoy the tax-free holiday offered by the government.
It should be noted that neighbouring Suriname just signed its first oil deal, securing not only 6.25 % royalty and 36% taxes but a sliding scale profit scale which allows the country to benefit from higher oil prices.
(‘Guyana’s 2% royalty make up for taxes not paid by ExxonMobil’- Former Pres. Sam Hinds)
Nov 14, 2024
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