Why hasn’t Guyana joined the list of 142 countries fighting tax evasion of...

Frompage4 exemptionfortheentireterm of the contract. The PSA stipulates that the GovernmentofGuyanapays the taxes owned Exxon, its partners and subcontractors to the Guyana Revenue

Authority, and then (astonishingly!) issues certificates of paid taxes. This enables Exxon and its partners to claim tax credits in their home countries. For 2021,Oil&GasGovernance

Network (OGGN) has recently estimated that Guyana has forgone at least USD 397 million in taxes to Exxon and its partners. By contrast, the closing balance of the Natural Resource Fund (NRF), Guyana’s sovereign wealth fund, was at USD 608 million at the end of 2021 as reported by theMinistryofFinance.The NRFisfedbyrevenuesfrom Guyana’s oil sales and royalties paid by Exxon and its partners, since the onset ofoilproductionin2019.In other words, the tax exemptionsgrantedtotheoil companies in 2021 alone amounted to 65% of Guyana’s total oil revenues earned between 2019 and 2021.

W h a t a r e t h e consequences of Guyana’s a b s e n c e f r o m t h e

OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS)?

First,Guyanaislosingouton taxing its largest contributors to its rapidly growing economy A c c o r d i n g t o t h e International Monetary Fund, the oil and gas industry is expected to accountfor60%toGuyana’s nominaldomesticproductin 2023. Second, failure to tax Exxon and its partners, means that Guyana’s ability to build up foreign currency reserves, primarily in US dollars, is seriously undermined. If Exxon were to pay taxes in Guyanese dollars, they would have to exchange millions of US dollars at the Bank of Guyana to meet their tax duties. This would rapidly increase Guyana foreign currency reserves. Finally, any taxes on multinational enterprises not claimed by Guyana will be claimed by other jurisdictions, such the UnitedStatesandChina.Not taxingExxonanditspartners inGuyanaistothebenefitof others.

Tax exemption clauses are an important tool to attract foreign companies to set up operations domestically, but they need to be issued with strict term limits,suchasamaximumof ten years. Guyana has failed to do so with the Stabroek Block PSA signed in 2016.

The current PPP-led administration has to date rejected calls to lift the indefinite tax exemptions granted to Exxon and its partners. Overall, failure to tax multination companies operating on Guyanese soil is reckless and a bad governancepolicy.Howcan a government expect simple citizens to pay their taxes, while the big fish remain exempt from taxation? This policy is unsustainable and will be a hard sell for any partyplanningtocontestthe upcoming general elections in2025.

As a first step to fix the unfair taxation regime of multinational companies, Guyana needs to join the OECD/G20 Inclusive FrameworkonBaseErosion and Profit Shifting (BEPS). Secondly, it needs to implement a minimum 15% corporatetaxrateforallnew production sharing agreements Finally, the Government of Guyana needs to renegotiate the Stabroek Production Agreement on the basis of having to comply with the OECD/G20 Inclusive FrameworkonBaseErosion and Profit Shifting (BEPS). ThisisastrategythatExxon and its Stabroek Block partnerscanhardlyreject.

Yoursfaithfully, AndreBrandli,PhD Professor, LudwigMaximilians-University Munich on behalf of OGGN (www.oggn.org/about)

BLUNT...BLUNT...BLUNT...BLUNT

BLUNT...BLUNT...BLUNT...BLUNT

BLUNT...BLUNT...BLUNT...BLUNT

BLUNT...BLUNT...BLUNT...BLUNT...BLUNT