Guyana sued for USD $ 61M in COVID assistance
– but gave USD $ 600M in taxes to oil companies in 2019
Kaieteur News – When the COVID-19 pandemic hit the world, Guyana, like many other third world countries, was forced to seek financial assistance to cope with the unprecedented health and economic crisis.
With goals of combating the pandemic in Guyana, the Inter-American Development Bank (IDB) had approved a US $ 22M loan, which it issued on November 9th, 2020, under its Natural Credit and Health Contingency Credit Facility Public.
The bank had said the spending was necessary to cover the transmission of COVID-19 and mitigate further health and economic consequences.
But before this, the IDB had, on November 6th, 2020, approved a COVID-19 loan for Guyana, up to US $ 30.4 million. This, he said, will contribute to providing financial support to vulnerable people affected by the crisis, and mitigate the crisis on the education sector.
The World Bank had also approved a loan for Guyana, totaling US $ 7.5M. He said the funds would strengthen the laboratory’s capacity, support screening and surveillance, improve contact tracking, and prepare healthcare facilities for more effective treatment and care for COVID-19 patients.
In total, Guyana would have extended its hands for about USD $ 61M in COVID support. It contrasts sharply with the gift of a staggering USD $ 600M in tax exemptions to oil companies in 2019. These and other shocking details were revealed by the Auditor General (AG) in his 2019 audit report.
“During the year 2019, the oil and gas sector received tax exemptions totaling $ 125.849 billion through the GO-Invest (Guyana Investment Office) and the Geology and Mines Commission (GGMC),” the Audit Report for 2019 has indicated.
To put that figure into perspective, the size of those exceptions measures up to 37% of last year’s $ 329.5B national budget.
In addition, the report also highlighted the fact that two companies object to assessing taxes totaling approximately $ 265.626M.
Guyana will continue along this path of billions being lost in revenue due to these exact exemptions it has granted. For context, instead of allowing ExxonMobil and its partners, Hess Corporation and CNOOC / NEXEN to pay their fair share of Corporate Income Taxes (CIT), Guyana had agreed to pay the same on the contractor’s behalf. share of oil profits.
That is, if Guyana gets 50% in profit and the taxes to be paid to the Guyana Finance Authority (GRA) are $ 20, it means that Guyana has earned only $ 30 in profit. If Guyana did not initially agree to such a provision in the Production Sharing Agreement (PSA), it would have walked away with a total of $ 70.
Tom Sanzillo, Director of Finance at the Institute of Energy Economics (IEEFA) and Financial Analysis, in commenting on this very issue had noted that the public is fundamentally changed when the government pays income taxes to the company.
Sanzillo, who has 30 years of experience in public and private finance, had also indicated that in a five-year period, ExxonMobil would walk away with US $ 653 million that it should have paid in taxes.
Based on his calculations, Sanzillo indicated that that bill would be what Guyana left behind would pay from its share of the profits.
A simple calculation of that figure over the 40-year life of the deal, considering ExxonMobil’s plan for five oil vessels by 2026, would see Guyana lose USD $ 40B in taxes throughout the deal.
However, the US $ 653M projection is based on the early years of ExxonMobil’s oil production in the Stabroek Block, when it recovers most of its investment in the development of the fields.
ExxonMobil’s profits will increase substantially once it recovers those investments, therefore, higher taxes would be due, and the actual loss of tax revenue to Guyana will likely be much higher.
Meanwhile, industry analysts as well as global organizations like the IBD and the International Monetary Fund (IMF) have said that Guyana should have taken more than a 50% share of the profits made from the Stabroek Block as it meets the tax obligations of the oil companies.
Both organizations had recognized that Guyana was changing itself by choosing to pay the oil companies taxes without increasing its share.