Low tax-to-GDP ratio, good or bad

Jun 14, 2025 Editorial, News

Editorial…

Kaieteur News – It could be asserted with some soundness that, in Guyana, taxes apply mainly to Guyanese. Or, that the foreign oil companies operating here enjoy a virtually tax-free environment. Before the deluge of oil made Guyana such a household name globally, the tax-to-GDP ratio was approximately 24%, a fair to comforting level. The advent of oil should have contributed something in tax dollars, significant enough to move that tax-to-GDP ratio upward. It has done the reverse, plunging by over a steep 50% to 11.6%. Steep or not, is this good or bad, was the question asked by Vice President Jagdeo?

Part of a press conference is to provide the listening media with details, which are then disseminated to the public. Jagdeo has turned that on its head, by bouncing back with questions of his own, when questions are asked of him. Part of his strategy is to buy time for himself, to get his brain in gear. A related aspect is to use that time to figure out how to evade what is put before him, and how to avoid giving a response that could expose him. A low tax-to-GDP ratio has its positives, and it also incorporates some negatives. One positive is that foreign investors study that percentage, which came from a UN report, and are attracted to the rich profit scenarios that doing business in Guyana offer. A negative is that merely whisper taxes anywhere and the corporate hatchets are drawn. Even in a free enterprise economy, such as the United States, say tax, and hell hath no equivalent fury. Ruling political parties and presidents have lost their hold on power for daring to deal with the tax beast. US President George H. W. Bush felt the pain of that loss, when he raised taxes, which was interpreted as a betrayal.

In addressing the low tax-to-GDP ratio, Jagdeo had one ace up his sleeve, and he quickly made the best use of it. “Well, the thing is that it is as a consequence of…the AFC having a zero-corporate tax for the oil and gas activities in Guyana, it’s a consequence of that (the 2016 PSA).” Though he prefers the room to forget, there is a duty not to let him do so. No question that the APNU+AFC Coalition betrayed Guyanese terribly when they let the lucrative tax prize get away from Guyana, and all the way to zero. But it must be remembered, and Jagdeo himself ought to remember what his PPP promised. He must be prompted to remember what his leader, President Ali committed to (“review and renegotiate” all contracts), and what he also backed at different times. It was to examine the 2016 ExxonMobil oil contract, and do better for Guyana. There are a number of economically disadvantaging provisions for Guyana in that oil contract, and one of the bigger ones is the zero-corporate tax regime under which ExxonMobil and its partners operate. Even more puzzlingly and embarrassingly, there is the issue of tax receipts being given to ExxonMobil for what it didn’t pay.

We at this paper agree that the Coalition Government has to shoulder more than its share of blame and shame for that 2016 PSA that it signed. It is the instrument through which provided the zero-tax incentive to ExxonMobil is possible. What could be possible is what Jagdeo and his president and his party had implored Guyanese to trust them to do, but has since walked back. It is to deal constructively with the revolting 2016 ExxonMobil contract. One of the fruits of such political leadership just has to be a tax arrangement that is not zero. The PPPC Government has balked at touching the contract. So also, oil czar Jagdeo shirks from going anywhere near to what would be sure to cause raised eyebrows, if not alarms, in ExxonMobil’s executive suite. The political creature in Jagdeo takes over, with him turning the question about low tax-to-GDP ratio back to his questioner.

When Guyanese seek straight answers from a national leader, they get slickness. The oil companies are rolling in fat because of zero tax, for one. Jagdeo reeks of the pathetic when he tries a stunt of a question for an answer.

Editorial, Foreign oil companies, Guyana Oil, Tax-to-GDP

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