The Laws of Guyana Corporation Tax Act imposes a 40% corporation tax on chargeable profits for commercial companies and 25% for non-commercial companies. The law defines commercial activity as “an activity carried out by a company trading in goods not manufactured by it” and non-commercial activity would be anything not covered in this definition. One could argue that income produced from selling crude oil, a raw natural resource, for export into the global oil market, constitutes commercial activity. The Laws of Guyana Corporation Tax Act does not exempt ExxonMobil Guyana, Hess (soon to be Chevron), or CNOOC, from corporation tax and it does not allow its government officials to pay the oil companies’ tax bills. The infamous 2016 Production Sharing Agreement (PSA) suggests otherwise, contractual terms that have placed Exxon and its affiliates above the laws of Guyana.
PSA Article 15.5 explicitly states that the Government of Guyana will not only pay the oil companies’ corporation tax, but it will also require the Guyana Revenue Authority which enforces the tax laws of Guyana, to issue a tax receipt stating that the oil companies paid tax. This tax receipt is then used to obtain a tax credit from the U.S. Internal Revenue Service (IRS). To reiterate, the Guyana Revenue Authority does not collect corporate income tax revenue from the oil companies but provides certified tax receipts for payments that are never made by ExxonMobil Guyana, Hess, or CNOOC. These tax receipts are then used to obtain a tax credit from the IRS. The Attorney General recently made statements that implied the stability clause in the PSA cannot subvert Guyana’s laws, stating, “It is a very rudimentary principle of law that if a contract conflicts with a Statute, the Statute shall prevail.”, see https://www.stabroeknews.com/2023/12/31/news/guyana/nandlall-disputes-claim-that-nrf-overstated-by-billions/.
It is evident that these oil companies do not fulfill their duty of corporate citizenship under the tax laws of Guyana and their enablement by the decision-makers alludes to tax avoidance and tax evasion.
The publicly released 2022 audited financials of Esso Exploration and Production Guyana Limited (EEPGL) were audited by TSD Lal & Co., see https://corporate.exxonmobil.com/-/media/global/files/locations/guyana-operations/em-guyana-annual-report-2022.pdf. The auditor’s opinion was that the financial statements were free of material misstatements. These financial statements are prepared by Exxon’s senior financial team and used in the preparation of their U.S. corporate income tax return signed off by tax partners.
EEPGL’s 2022 statement of profit has a GY $59B income tax expense line item. The notes in the financial statements declare that the income tax expense is to be paid by the Minister of Natural Resources and is also to be included as income for Exxon. How does one incur an expense that is never paid, recognize income that is never earned, or give an impression to U.S. federal tax authorities that foreign income tax was paid to the country of Guyana? Only the auditors and Exxon’s financial leaders who claim integrity and ethics in their accounting practices can answer these questions.
The IRS administers foreign tax credit laws that mitigate double taxation. IRS auditors would require proof of such payments that support foreign tax credit claims. If the tax receipts produced by the Guyana Commissioner General were indeed used to satisfy Exxon’s claim for foreign tax credits, Exxon would have not only avoided a GY $59B corporation tax, but they would have also evaded a U.S. corporate income tax liability of US $282M. This notion of foreign tax credit fraud would also apply to Hess. In their 2022 country-by-country income tax reporting, Hess declared a US $230M income tax expense paid to Guyana.
There is one group that should be held accountable for the issues unraveled by the PSA which have been intentionally unaddressed, and that is the political party currently in office. The current political party has inexplicably reversed its pre-2020 election stance: the PSA has robbed the nation of its patrimony and a promise that it will be renegotiated. If the government does not protect the integrity of Guyana’s laws, it defeats the purpose of upholding any legal system here in Guyana. Citizens and external observers can automatically presume that the precedent in this country is a system that lacks order and one that subscribes to corruptive behavior at the highest level. Such a standard would be reflective of some of the most tyrannical and oppressive countries in the world. Is this what the people of Guyana voted for?
Regards,
Candice Dorwish
Article Originally Published At: https://www.stabroeknews.com/2024/01/14/opinion/letters/the-party-in-office-has-to-be-held-accountable-for-the-oil-companies-tax-farce/
