(WiredJA) Chartered accountant Christopher Ram alleges that ExxonMobil’s tax reporting practices are fraudulent, as the company claims tax deductions in the United States for taxes it does not actually hisse to the Guyanese government.
This arrangement stems from the 2016 Production Sharing Agreement (PSA) between Exxon and Guyana, which exempts the company from paying taxes in the country.
Ram points out that Exxon’s 2023 Annual Report reflects an operating profit before taxation of GYD 752,782,373,026 (US$3.6 billion) and an income tax expense of GYD 138,182,695,517 (US$658 million), resulting in a reported total comprehensive income for the year of GYD 614,599,677,509 (US$2.9 billion).
However, Ram contends that reporting these figures as tax expenses to the U.S. government is misleading, given that no actual tax payments are made to Guyana under the terms of the PSA.
The controversial tax arrangement is rooted in the PSA’s Article 15.4, which stipulates that at the end of each year, the oil company prepares its tax returns and submits them to the Minister responsible for Petroleum.
The Minister then issues a receipt to the operator, indicating that the annual income tax was paid, despite no actual payment being made to the Guyanese government.
Ram explained, “The company then presents this certificate to the United States of America and claims that figure as a tax deduction on its total tax liability.” He argues that this practice amounts to “skullduggery and accounting scampishness.”
The implications of this arrangement are significant for Guyana. Since the deal was signed by the former administration and maintained by the current government, the country has reportedly lost over US$3 billion in potential tax revenue from petroleum companies operating within its borders.
Kaieteur News reported substantial tax exemptions based on previous Auditor General (AG) reports:
- 2019: US$600 million
- 2020: US$685 million
- 2021: US$1 billion
- 2022: US$541 million
- 2023: US$658 million (from Exxon alone, based on the company’s Annual Report)
It’s worth noting that these exemptions extend beyond ExxonMobil to include its Stabroek Block partners, Hess and CNOOC, as well as subcontractors hired by the Co-Venturers.
The PSA’s Article 15.1 broadly outlines these exemptions, stating that the Contractor (ExxonMobil Guyana Limited) and its affiliates are not subject to tax, value-added tax, excise tax, duty, fee, charge or impost on income derived from petroleum operations, property held, or transactions, except as specifically outlined in the agreement.
Ram, who is also a prominent Attorney-at-Law, has accused ExxonMobil of underreporting its earnings from the lucrative Stabroek Block operations. He made these allegations during an appearance on the Oil and Gas Governance Network’s (OGGN) weekly radio programme ‘Oil Talk’, broadcast on Kaieteur Radio 99.1/ 99.5 FM.
As Guyana continues to grapple with the complexities of its nascent oil industry, the tax arrangements outlined in the PSA remain a contentious issue. The situation raises questions about the long-term economic benefits for the country and the transparency of financial reporting in the oil sector.