Introduction
The controversy over tax certificates issued to oil companies continues unabated. On March 17, the Minister of Parliamentary Affairs and Governance responded to the Oil and Gas Governance Network’s information request by suggesting that tax details could be found in Commercial Registry filings – a claim I discredited in my March 21 column as both factually incorrect and legally flawed.
Now, the overzealous Joel Bhagwandin has entered the fray with a March 25 letter attempting to “simplify” what he calls an “unnecessarily complicated” issue. In his quest for simplicity, however, Bhagwandin has simplified reality itself away. He states that “the profit share paid to the Government is treated as the taxes paid by the US oil companies, and it is this sum that the tax certificate in question is based on.” The vacuity of this statement is quite remarkable. If profit oil magically transforms into tax certificates, surely this fiscal alchemy must leave some trace in our public accounts? Yet the National Estimates show no such entries, and it would be helpful if Mr. Bhagwandin could say where these are concealed.
Confusion
He compounds his error by claiming that “the profit share due to the Government is reported on the financial statements as the oil companies’ tax liabilities.” One wonders which financial statements Bhagwandin has been reading – certainly not those filed by Guyana’s oil companies. These documents show no such thing. The companies recognise only their portion of profit oil as income, and certainly no evidence of the Government’s share being recorded as tax liabilities.
He also appears to be confused about the distinction between payment “on behalf of” and payment “in lieu of” – two distinct legal concepts. Article 15.4 of the 2016 Petroleum Agreement states that “a sum equivalent to the tax assessed… will be paid by the Minister to the Commissioner General of the Guyana Revenue Authority on behalf of the Contractor.” A payment “on behalf of” is one you make for someone who remains obligated to pay; a payment “in lieu of” substitutes for the original obligation. His quotation is correct but is totally misconstrued. The Agreement specifies the former, while Bhagwandin’s explanation suggests the latter.
Magic wand
This is not merely semantic. The distinction determines whether actual money must change hands or whether profit oil can be waved about like a magic wand to conjure tax certificates. Bhagwandin correctly notes that this arrangement exists to satisfy US tax laws but fails to follow his logic to its conclusion – if certificates satisfy US tax authorities, they must represent actual transactions, not paper fiction.
The government finds itself in a legal and accounting quagmire of its own making. Unable to reconcile the requirements of the 2016 Petroleum Agreement with proper financial management, it deploys surrogates to confuse rather than clarify. The 2021 Natural Resource Fund Act further complicates matters. Because its framework for payments out of oil revenues does not permit this tax arrangement, it does not mean that the Government no longer has any such obligation. Exxon wants every drop of blood, sorry oil, and has been insisting on that certificate. After all, as the mantra goes, it is all about sanctity of contract.
The Commissioner of Information has become the Commissioner of No Information – deflecting, ducking, and dodging legitimate inquiries. In response to my formal request for details about these certificates, the Commissioner questioned whether I had searched for “critical financial records” – whatever that means – instead of addressing the substance of my questions. Corporate filings at the Commercial Registry could not possibly contain information about tax certificates issued by the Guyana Revenue Authority. We are, therefore, left with no evidence of tax payments and no information on tax certificates.
Conclusion
It may seem to some that in a petroleum bubble, opacity, obfuscation, dereliction, over-simplification and incompetence do no harm. In fact, they are critical ingredients of the resource curse for the country. Dismissing unusual and complex fiscal arrangements as “simple matters” does severe damage to those they seek to help, to themselves and to their reputation. Let us get back to these straightforward questions that require direct answers.
What is the amount of corporation tax paid by the Minister of Natural Resources on behalf of the oil companies from 2021 to 2024?
Are these payments reflected in the revenue of the Guyana Revenue Authority and the Consolidated Fund?
What is the exact value of tax certificates issued to each oil company since production began?
If the GRA did not issue the certificates, who did?
Now, that is simple.
