There is no provision for any effective Royalty in the 2016 Production Sharing Agreement, PSA2016. Guyana receives 2 percent as ownership rights called Royalty (usus rights). There are two other classes of rights in the design of business contracts; transformation rights and fruits of production rights. Zero value is assigned for transformation rights (abusus rights), such as crude oil turned into refined oil. The oil companies create value-added refining in their own countries abroad, while Guyana remains a raw materials producing country.
The third class of rights, profits (fructus rights) in the PSA2016 is calculated after 75 percent is taken for expenses, with excess-expenses being carried over into future years; an amount that is not available to the public. The 75 percent expense limit is for the purpose of estimating the oil companies taxes owed. Guyana then issues tax receipts as if the taxes flowed into Guyana’s treasury account (Consolidated Fund).
The oil industry pays zero profits tax, even as they make super profits for their shareholders. While resource exhaustion for building materials, like sand and stone prices are rising, adding to overall inflation and affecting new home building costs tax-free status is granted to the oil companies, while Guyanese must face the brunt of inflation, everywhere, in the world’s fastest growing economy.
Guyana deserves its profits tax. Two percent Royalty and zero taxes are not good for Guyana. The 75 percent expense recoveries could be rearranged so that tax revenues are actually being paid to Guyana.
Sincerely,
Ganga Persad Ramdas
