Amid a contention by analyst Christopher Ram that the Natural Resource Fund (NRF) is overstated by a whopping $274b because it includes oil company taxes that should be remitted to the GRA, Attorney General Anil Nandlall SC yesterday argued that Section 45 of the governing Act has a “supremacy provision” which overrides the taxing statute.
In his December 29th oil and gas column in Stabroek News, Ram noted that in his previous column he had opined that the NRF was overstated by “tens of billions of Guyana dollars”.
He added: “To my horror, my research discovered that the overstatement at 30 June 2023 after the payment of 2022 corporation taxes for the oil companies, was $274.8b. ($274,765m.), representing 76% of the Fund balance at that date. The magnitude and significance of the error is evident from the 2022 financial statements of the Fund, which received a clean, unqualified opinion by the Audit Office of Guyana, showing the value of the Fund at that date of G$298b. With taxes payable amounting to $49.7b for the years 2020 and 2021 to be financed out of Guyana’s share of profit oil, the correct value of the Fund at 31st. December 2022 should have been G$248.4b, the difference representing an overstatement of 20%. A similar overstatement for 2023 alone, amounted to a further G$225.1b., hence the cumulative overstatement of $274.8b”.
Ram, a chartered accountant and attorney, has frequently raised concerns about how the taxes paid by the Guyana Government on behalf of Exxon’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), Hess and CNOOC were being treated and his column on Friday consolidated the figures for the various years.
“As astonishing as it sounds, if just one of several persons or agencies involved – the Office of the President, the Ministry of Finance, including the Budget Office, the Ministry of Natural Resources, the Bank of Guyana, the Guyana Revenue Authority (GRA), the NRF Board and, I must say, the National Assembly and the Attorney General’s Chambers – had been paying attention to and discharging their respective responsibilities, this fiasco would have not arisen in the first place. What is worse, this situation has existed since at least 2021”, Ram declared.
He pointed out that as cited by EEPGL, under Article 15.2 of the petroleum agreement, the Company is subject to the income tax laws of Guyana with respect to filing returns, assessment of tax and keeping of records. Under article 15.4 of the Petroleum Agreement, the sum equivalent to the tax assessed on the Company will be paid by the Minister responsible for petroleum to the Commissioner General, Guyana Revenue Authority and is reported as non-customer revenue.
Ram said that the observant reader will note the obligations of the three companies do not include the payment of taxes, which is done on their behalf by the Government. The reference to “non-customer revenue” is to comply with Article 15.4 (a) of the Agreement, he said. For the answer to the question of the proper source of the money to pay the Commissioner General, he said that one has to turn to Article 15.4 (b) of the Agreement. That agreement requires the tax to be paid out of the Government’s share of profit oil, the proceeds of which, under the NRF Act, are deposited into the Natural Resource Fund.
Actual
Ram then asked in his column if any actual tax payments have been made by Minister of Natural Resources, Vickram Bharrat to the GRA on behalf of the oil companies.
“What I can state with a high level of confidence is that nothing emanating from several governmental agencies suggests that the Minister of Natural Resources has paid any actual cash to the Guyana Revenue Authority for which Certificates of Taxes Paid must be issued. These agencies include: the Office of the President, which has constitutional responsibility for the natural resources sector, the Ministry of Natural Resources whose Minister is responsible for the general oversight of petroleum and the mining sector, the Ministry of Finance which has responsibility for the Budget Office and for the annual Budgets, the Bank of Guyana which operationally manages the Natural Resource Fund, the Guyana Revenue Authority which is responsible for the collection of taxes and the Natural Resource Fund Board”, Ram said.
Ram argued that government officials have clearly not understood the implication of the 2016 Petroleum Agreement on the Natural Resource Fund Act.
“As a consequence, there is a clear disconnect between the Act and the Petroleum Agreement in that section 16 of the Act dealing with withdrawals does not include the taxes paid on behalf of the oil companies. That Act must therefore be amended urgently, to preserve the so-called sanctity of the 2016 `contract’. In doing so, the draftspersons would also have to address the overstatement of the Natural Resource Fund either by way of a belated cumulative transfer, or by some other legal device”, Ram posited.
Fallacies
In his statement yesterday on his Facebook page titled `Traversing legal fallacies’, Nandlall did not name Ram neither did he refer to the column in Stabroek News.
He however said: “The bold assertion making waves in the press that the Natural Resource Fund is overstated by several billions is one that is grounded in a shocking misunderstanding and misinterpretation of the intendment, policy and express provisions of the Natural Resource Fund Act 2021, as well as, a misconception of certain elementary principles of law. It would be a grave omission to leave such legal fallacies untraversed on the public record”.
Nandlall said that it was significant that the author is not alleging any act of corruption or unlawful haemorrhaging of the petroleum revenues, although the “tone in which he wrote and the sensational prominence he is accorded, may have very well conveyed that erroneous impression to the unsuspecting reader”.
He said that even if the contention possessed any merit, it would be of academic importance only, since whether the monies are paid to GRA as taxes or are paid into the Natural Resource Fund, they are in the State’s coffers and by the functioning of the NRF law will eventually be deposited into the Consolidated Fund.
Nandlall said that it is clear that Section 15 (1) and (2) of the NRF Act authorises petroleum revenues to be paid directly into the Fund.
“This obviously includes whatever taxes are leviable in relation thereto. Cardinally, once deposited, the Act strictly and rigidly prescribes how monies are to be withdrawn from the Fund, by what process and for what purposes. For example, by Section 16, `all withdrawals from the Fund shall be deposited into the Consolidated Fund and shall be used only to finance – national development priorities …’ and `essential projects that are directly related to ameliorating the effect of a major natural disaster’”, Nandlall asserted.
He said that there is no provision in the Act which permits or authorises deduction of taxes for or on behalf of the Guyana Revenue Authority.
He added that Section 15 (4) of the NRF Act specifically exempts from “Petroleum revenues” certain types of taxes. These include value added tax collection on inputs or outputs from production operations; customs duties collected on inputs into production operations; and withholding tax on payments made to contractors by companies or individuals undertaking production operations. These are revenues, he said, that are not deposited into the Fund, and the relevant taxes therein mentioned are levied and received by GRA. He said that this showed that the draughtsman’s mind was alive to what taxes are to be paid directly to GRA.
Noting that the author of the column places great reliance on the “infamous” 2016 Production Sharing Agreement, as that Agreement imposes upon the Minister, a number of obligations in respect of the payment of taxes to the GRA on petroleum production, Nandlall argued that those provisions in the Agreement have obviously been overtaken by the Natural Resource Fund Act.
“It is a very rudimentary principle of law that if a contract conflicts with a Statute, the Statute shall prevail. Moreover, the Natural Resource Fund Act itself has a supremacy provision. It is Section 45. It provides: `in the event of any inconsistency between the provisions of this Act and the provisions of any other law on fiscal matters and financial management, or between the provisions of the Act and the terms of a petroleum license, the provisions of this Act shall prevail.’” Nandlall said that this section is intended to and shall override every other taxing Statute on the matter.
Additionally, he said that it is public knowledge that when the 2016 Agreement was secretly executed here was no fiscal framework to regulate petroleum revenues and therefore, the extant framework at the time would have applied.
“That regime is what is set out in the Agreement. A new one has now been created. It finds expression by legislation. It must prevail as the law of the land. No agreement can stand in its path. If there is any conflict or inconsistency, even with existing legislation, the draughtsman has put that to rest by the crystal language of Section 45”, the Attorney General declared.
