VP Jagdeo tells Exxon boss taxes not the same as paying royalty and profits

Mar 15, 2025 News

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Kaieteur News- Vice President Bharrat Jagdeo does not agree with President of ExxonMobil Guyana Limited, Alistair Routledge that taxes are the same as royalty and profit sharing.

He made his position clear on Thursday during a Freedom House press conference in response to a question posed by Kaieteur News.

This newspaper had pointedly asked the Chief Policymaker for the Oil and Gas sector whether he agrees with the explanation by Routledge that taxes are the same as the royalty and profit-sharing provisions, outlined in the 2016 Production Sharing Agreement (PSA).

To this end, Jagdeo explained that while profits and royalty received are key elements of the oil contract, government does not agree that they are equivalent to taxes. In fact, he made it clear that he believes taxes should be paid.

“On waving of taxes, profit sharing and royalty are a very important part of the PSA but we believe that there should be taxes too,” the former President said.

Consequently, he explained, “And that is why in the new PSA, we maintained the profit sharing, we increased the royalty from two to 10% and we have now put in a 10% corporate tax in the new PSA.”

As such, Jagdeo made it clear that government does not agree with the explanation provided by Routledge.

Notably, ExxonMobil and its affiliates are exempt from 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.

Be that as it may, Routledge in an attempt to bamboozle Guyanese said the country is ultimately receiving taxes through the profit share arrangement and the 2% royalty requirements imbedded in the deal.

He explained, “There are different forms of agreements that are used in the oil and gas industry. The one that is being implemented in Guyana is the Petroleum Sharing Agreement so it’s literally a sharing agreement where the investors invest, the government doesn’t have to make any investment up front but it shares in the profit and receives a royalty.”

As such, he continued, “In effect, that profit-sharing and royalty are tax. In other systems like whether you are running a different local business, you pay corporate tax – in effect it is the same. It is giving a tax, a revenue to the State. It is remitting revenue to the State…while it is not called tax in the Petroleum Sharing Agreement in effect that’s what it is. It is payments to the State in lieu of there being a tax agreement.”

Routledge pointed out that Guyana has implemented a 25% corporate tax requirement. On the other hand, he highlighted that Guyana receives 52% in profit and royalty. To this end, he reasoned, “So would you prefer to have 25% income tax or 52% plus of revenues effective tax to the state from the PSA?”

Notably, Kaieteur News told the President of EMGL that in other jurisdictions, the company is required to pay taxes, despite making royalty and profit oil payments.

While he admitted that the company does not pay corporate taxes to the State, he noted that Exxon is still required to pay other taxes under the Petroleum Agreement, such as withholding taxes.

Importantly, this skewed representation of the revenues received by Guyana under the 2016 PSA has already been rebutted by stakeholders, including VP Bharrat Jagdeo. Previously, when Exxon erected billboards across the country claiming that Guyana receives 52% of all profits, he said: “One thing I can agree with Vincent Adams on, is that these billboards that Exxon (is) putting up all around the place, is misleading in many ways… Exxon’s billboards are misleading. So, they said Guyana receives 52% of all profits from Stabroek Block, 50% profit share plus 2%, they don’t speak about the 75% here going to cost recovery.”

Jagdeo pointed out that presently, 75% of the earnings are deducted to cover costs, with the remaining 25% shared with Guyana. This means that Guyana actually receives 12.5% profit, in addition to its 2% royalty.

In October last year, former President and Prime Minister, Samuel Hinds said that royalties paid by Exxon make up for the taxes lost through the PSA.

In a letter to the Editor, he reasoned, “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 says that royalties and other payments to the Government would be received in the place of taxes… a good question would then be whether we are getting more from our royalty and profit share than we would have gotten from regular taxes.”

Government later distanced itself from the comments made by Hinds.

 

(VP Jagdeo tells Exxon boss taxes not the same as paying royalty and profits)

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• ExxonMobil, Jagdeo, profit sharing, royalty, taxes

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