Guyana Share of Oil Revenue: Is this an Equitable Arrangement?

Dear Editor,

 It is generally accepted that within the boundaries of a sovereign state, a government does not pay taxes on behalf of any institution or any individual; but it  has the  authority to grant tax exempt status to certain groups, including churches, educational institutions, and non-profit organizations. Exxon and its  oil consortium in Guyana is not a non-profit organization; and as such, these oil firms should be paying taxes, given that they are profit maximizing businesses. However, in the 2016 Oil Agreement with the Oil Company, this requirement of the company paying taxes is not satisfied;  for in Article 15.4 and 15.5 it is stated that: 

15.4 The Minister hereby agrees:

(a) that a sum equivalent to the tax assessed pursuant to Article 15.2 and 15.3 will be paid by the Minister to the Commissioner General, Guyana Revenue Authority on behalf of the Contractor and that the amount of such sum will be considered income of the Contractor; and

(b) that the appropriate portion of the Government’s share of Profit Oil delivered in accordance with the provisions of this Agreement shall be accepted by the Minister as payment in full by the Contractor of Contractor’s share of each of the following levies, whatsoever the applicable rate of such levies may be, which the Minister shall then pay on behalf of the Contractor under Article 15.4 (a) to the Commissioner General, Guyana Revenue Authority or such successor authority:

(i) the Contractor’s share of the income taxes imposed by the laws of Guyana, including, but not limited to, income tax imposed by the Income Tax Act and corporation tax imposed by the Corporation Tax Act and payable at the date hereof, or from time to time thereafter, and any other levy or charge on income or profits which may become payable from time to time under any laws, acts, statutes, regulations or orders by the Government; and

(ii) any other similar charge imposed and payable in respect of Petroleum Operations at the date hereof, or from time-to-time hereafter, except charges of the type specified in Article 15.1 (a-b).

15.5 The Contractor shall provide the Minister with the Contractor’s income tax returns to be submitted by the Minister to the Commissioner General, Guyana Revenue Authority so the Minister can pay income tax on behalf of the Contractor as provided under Article 15.4 (a). On such returns, the Minister shall note that he is paying the income taxes on behalf of the Contractor, so that the Commissioner General, Guyana Revenue Authority can properly prepare the receipts required under this Article 15.5. Within one hundred and eighty (180) days following the end of each year of assessment, the Minister shall furnish to the Contractor proper tax certificates in the Contractor’s name from the Commissioner General, Guyana Revenue Authority evidencing the payment of the Contractor’s income tax under the Income Tax Act and corporation tax under the Corporation Tax Act. Such certificates shall state the amount of tax paid individually on behalf of Contractor or parties comprising the Contractor and other particulars customary for such certificates.

According to the published financial statements of the Oil Consortium, the total amount of taxes paid by the Government on behalf of the Company, using the profits and royalties it received from the company, amounted to US$7.5 Billion out of a Total Revenue received of  US$61.3 Billion for the period 2020 to 2025. This tax payment of US$7.5 Billion by government represents 12.24 percent of Total Revenue  (US$7.5 B = US$61.3B x 12.24%).

Since the financial statements for 2026 are not available at this time, it is assumed that the taxes as a share of total revenue will be 12.24 percent in 2026, as it was in the previous period 2020 to 2025. Furthermore, since the total revenue received between 2020 to June 2026 is US$76.3 Billion, the estimated total tax receipts is US$ 9.3 Billion  (US$9.3B = US$76.3 B x 12.24%). 

What is disturbing about this arrangement is fact that the  tax rate of 12.24 percent of total revenue is almost equal to the Guyana profit share of 12.5 percent of total revenue. In other words, what Guyana receives as profit  share is automatically recaptured by the company when Guyana pays the company’s taxes that is in keeping with Articles 15.4 (a) and 15.5 in the Agreement..

The question, therefore, is: How does this tax payment by the Government on behalf of Company impact in real terms the true value of the revenue Guyana receives?  The answer: Guyana in real terms, after paying the taxes of the Company,  only receives around US$2.8 Billion or 3.7 % of Total Revenue US$76.3 Billion, and not 14.5 percent of total Revenue as stated in the Agreement. Table 1  contains the details of Guyana’s share before and after taxes.

Total revenue is US$76.3 Billion; cost recovery is US$55.0 Billion (72.1% of Total Revenue (TR)). Guyana profit before tax payment US$10.7 Billion (14.0% of TR).  Guyana pays US$9.3 Billion (12.2% of TR) in taxes for the company. Guyana profit after taxes US$1.3 Billion (1.7% of TR). Guyana royalty is US$1.5 Billion (2% of TR). Since Guyana only receives in real terms US$2.8 Billion  (3.7 % of Total Revenue), this implies that the company in real terms receives US$73.5 Billion, or 96.3 % of Total Revenue. 

Question: So what is required for Guyana to get a real and equitable share of its oil and revenue from this operation? The answer: Ring-fencing must be employed; real-time auditing is required (audit reports for several years are still outstanding); and taxes must be paid by the consortium from its share of revenue and not by the government for the consortium. As the Guyanese saying tells us: “Eye-pass got fuh done now”!.   

Yours truly,

Kenrick Hunte

Darsh Khusial

Joe Persaud