In his Stabroek News column dated March 28, 2025, titled “[t]he tax certificate mystery”, Mr. Lalbachan Christopher Ram sought to offer a response to my missive dated March 25, 2025, titled “profit share is classified as taxes paid by and for which tax certificates are issued to US oil companies”. The genesis of Mr. Ram’s longstanding argument on this subject matter is a perpetual argument, which I shall not engage in any further, other than to establish that he is, and will always be entitled to his flawed and incorrect opinion (s). However, I wish to limit my response to the following.
First, permit me to correct his assertion that the “government finds itself in a legal and accounting quagmire of its own making”. The incumbent government did not create this so-called legal and accounting quagmire that he refers to; it was the APNU+AFC Government that signed onto this so-called legal and accounting quagmire.
Disappointingly, albeit not surprisingly, Mr. Ram has disingenuously intimated that the income tax paid by the government on behalf of the oil companies pursuant to Article 15 of the Petroleum Agreement (2016), is not reported on the oil companies’ financial statements that are legally mandated to be lodged at the Commercial Registry. He then concludes with a number of questions as if to suggest that there is no transparency in so far as the income tax data is concerned that it is not publicly available, or as he bluntly suggests, there is some mystery, and whether the tax payments are paid into the Consolidated Fund (CF), because according to him, it is not provided for in the Natural Resource Fund (NRF) Act (2021).
In table 1, I have consolidated the oil companies’ income and expenditure statements for the period 2021 – 2023, to substantiate and demonstrate my argumentations. And for the avoidance of any doubt, I have attached with this letter to the media—copies of those financial statements so that the media houses can verify for themselves, as well as to publish so that the reading public can verify for themselves that the income and expenditure statements for the oil companies do contain the income tax expenses.
As shown in table 1, the total income taxes paid for the years 2021, 2022 and 2023, amounted to G$577.5 billion, hence, the tax certificates issued by the Guyana Revenue Authority (GRA) for those years would cumulatively amount to this sum. The effective tax rate in 2021 was 14.5%, in 2022 it was 16% and in 2023 it was 18.8%, giving rise to an average of 16.4% during this period. The government’s effective rate of profit share during the cost recovery period is 12.5%. Further, it is important to note that the profit oil deposited into the NRF may not correspond to the adjusted government’s share of profit as reported in the financial statements. The reason for such observable variance is because the government’s profit share is not paid in cash, it is paid in the form of the raw crude oil. As such, the market price obtained for the sale of the government’s share of crude oil will vary throughout the year, whereas the financial statements are most likely prepared using the oil companies’ average price for the reporting period, and their own exchange rate for the conversion to Guyana dollars, which is likely to be the average market rate. For reporting purposes, the government, on the other hand, would use the Bank of Guyana exchange rate for their conversion from USD to GYD, which is typically below the average market rate.
With respect to whether the tax payments are required by law to be deposited in the Consolidated Fund or not, Mr. Ram has long established a flawed conjectured argument that the government is in breach of the NRF Act and the Fiscal Management and Accountability Act (2003) (FMA Act), that the portion of taxes paid should be deposited into the Consolidated Fund. Nonetheless, contrary to his usually misguided interpretation on these matters, Section 38 (1) a of the FMA Act states—
“All public monies raised or received by the Government shall be credited fully and promptly to the Consolidated Fund, except”-
- Moneys credited to an Extra-Budgetary Fund as stipulated in the enabling legislation establishing that Fund;
- Moneys credited to a Deposit Fund; and
- As stipulated in the
Section 39 of the FMA Act sets out the conditions in respect of the accounting rules, governance and management procedures by which an Extra-budgetary Fund may be created. Accordingly, the NRF is an Extra-budgetary Fund created, inter alia, the enactment of a legislation, pursuant to Section 38 (1) of the FMA Act. Therefore, the sum representing the income taxes paid into the NRF from the government’s share of profit oil is properly and legally placed in the NRF.