Dear Editor,
I refer to Mr. Reggie Bhagwandin’s letter, “Oil deal was designed to cater for the nature of the industry” and wish to comment as follows: An argument for tax waivers for Foreign Companies – Profits are not guaranteed. Business is very competitive. Therefore, it makes good sense for host governments to grant tax waivers for limited periods, say 3 – 5 years. The tax waiver is an incentive for the foreign business to come in to do business in the host country – to sort of alleviate its business risks.
In Reggie Bhagwandin’s letter, he makes a novel argument for tax waivers. He says the “scale of the investment” (15 or 50 times Guyana’s GDP) is sufficient justification for waiving taxes permanently (for 30-years or more). “Scale of investment” is a nonsensical and false argument – because of two facts, (a) recovery of investment is guaranteed – covered in the 75% Cost Recovery, taken off the top; (b) there are 9 billion barrels of proven oil reserves; (c) Despite the coming revolution in EVs (Electric Vehicles) consumption demand for oil will be relatively stable for the next 30-years. There is absolutely no risk to the oil companies’ investment. I see no good reason for the Government of Guyana (GoG) to waive corporate income tax on oil companies. Can Mr. Bhagwandin cite one country anywhere in the world where oil companies pay no corporate income taxes to the host gov’t? In neighboring Suriname oil companies pay 6.25% royalty plus corporate income tax at the rate of 36%, plus profit share. ExxonMobil is required by law to pay corporate income taxes to the U.S. gov’t on the profits made in Guyana – but none to GoG. What could be the justification for such an anomaly, if not an insult to the Guyanese people?
Prof Ganga Ramdas makes a logical and moral argument. Local (Guyanese owned) businesses are required by law to pay corporate income taxes which go to provide and maintain roads, bridges and ports – but here comes ExxonMobil whose business operations make use of our roadways, bridges and ports – all for free. Reggie Bhagwandin chooses to disregard this moral argument. One last point. Guyana Revenue Authority is required by law to issue tax receipts to oil company – when in fact none will be paid. What is this all about? Mr. Bhagwandin as well as GoG should clear up this matter for the benefit of the Guyanese people. More transparency is needed, not less.
Sincerely,
Mike Persaud