The audit results for the oil companies operating in the Stabroek Block from 1999 to 2017 revealed a stunning US$214 million in questionable expenses. The auditor’s report was leaked 2 years after completion which raises questions about why the government wasn’t transparent with the Guyanese people, given the outrageous amount of money under question. There is a larger figure that is a mystery and it relates to the exemptions given to the oil companies and their related contractors for 2021.
It is tax season for many in America. Many individuals and companies are diligently preparing their taxes. The threat of an audit, when information does not reconcile, can result in months of stress dealing with the US tax agency, that is the Internal Revenue Service (IRS). It is also tax season in Guyana from Feb 15, when employers submit data on employees’ earnings, to the final deadline on April 30. The Guyana Revenue Authority (GRA) are as diligent and competent as the IRS, but they do not possess the reach to deal with the biggest fish. In 2021, Guyanese paid US$206 million in personal income taxes while the IHS audit, completed that same year, exposed that foreign oil companies claimed US$214 million in questionable expenses. The little fish are kept well in the net.
In June, 2021, during a Guyana Extractives Industry Transparency conference, the Ministry of Natural Resources (MNR) had promised to release the Tax Certificates that Guyana issues to the oil companies, see here https://youtu.be/sd8oiNNQqXQ?t=2808. To date this information has not been released. The oil companies do not pay profit taxes but received a tax certificate that they could use towards a foreign tax credit.
But there are other ways to make an educated guess about the taxes that the oil companies in the Stabroek Block should have paid but did not for 2021. On the Hess USA website, information is disclosed about taxes that Hess paid in each country where it operates. For 2021, specifically for Guyana, the tax figure disclosed to the US Tax Authority (IRS) is US$119 million in deferred income tax expense and no current tax expense, please see https://www.hess.com/sustainability/how-we-operate/tax-practices. We know Hess has a 30% share in the Stabroek Oil Block. Hence, a 100% percent of taxes would be US$119m/0.3 which would total US$397 million in taxes for the oil companies operating in the Stabroek Block. One should recall that this is US$397 million that Guyana is forgoing in taxes to rich oil companies.
Now if we try to reconcile the US$397 million tax figure with what the Guyana’s Auditor General Report for 2021 disclosed, we have a material anomaly. Guyana’s Auditor General (AG) disclosed that the Oil & Gas sector had about US$977 million in exemptions, see the GYD$204 billion figure in the table on page 72 here http://www.audit.org.gy/pubs/AnnualReport2021.pdf, an exchange rate of USD to GYD of 208.5 was used. If exemption for taxes on profit oil was estimated at US$397 million, what is the detailed breakdown of the other exemptions to the oil companies that total US$580 million?
The 2021 EITI report due by the end of this year should help shed light on the mystery lying in the US$977 million in exemptions to the oil companies. Specifically, section 4.1 of the EITI requirements which is titled “Comprehensive disclosure of taxes and revenues,” may help tease out the details in the 2021 EITI report for Guyana. However, Guyana’s EITI status is currently suspended as it missed the end of 2022 deadline for the 2020 EITI report, see here https://eiti.org/countries/guyana. Let’s hope that Guyana can avoid an EITI delisting which may mean keeping this mystery in the dark from the Guyanese people.
Given the recent revelations about the US$214 million in questionable charges that were revealed in the report by the international auditor, IHS Markit, it raises alarms about what may be hidden in the US$977 million in exemptions given to the oil companies and their partners for 2021. What is astounding is that Guyana only earned US$409 million from oil in 2021 but gave away more than 2 times that amount in exemptions to the oil companies. This is yet another case of the Guyanese poor fattening the rich.
Or looking at it from another angle, the Bank of Guyana reported US$206 million in personal income taxes for 2021. Guyana gave the oil companies US$397 million in tax breaks on profit oil! Thus in 2021 we could have given every Guyanese worker a tax break instead we gave the rich oil companies a tax holiday.
Yours faithfully,
Alfred Bhulai
Andre Brandli
Janette Bulkan
Darsh Khusial
Joe Persaud
