GRA installing rigid systems to keep close watch on ExxonMobil
Jul 17, 2017 , http://www.kaieteurnewsonline....watch-on-exxonmobil/
– Tax Chief says, “It is a different kettle of fish”
By: Kiana Wilburg
If the Guyana Revenue Authority (GRA) has difficulty catching regular tax evading citizens and holding them accountable, how will it fare with an experienced oil giant like ExxonMobil?
GRA Commissioner General, Godfrey Statia appears confident that the revenue entity will be more than able to keep track of ExxonMobil.
Statia acknowledged that while GRA has encountered issues with hauling in some local tax evaders, he insists that “ExxonMobil is a different kettle of fish.” In this regard, he emphasized that ExxonMobil’s operations will see the oil and gas sector eventually running 50 percent of the economy.
Given this significant role the oil and gas sector is expected to play in the country’s economic development and wellbeing, Statia said that rigid systems are being put in place from GRA’s end. This he said, is all to ensure that the nation is not cheated in any way of the taxes that it is entitled to.
“If you look at oil it will be 50 percent of the economy. So what we are doing is gearing up ourselves to deal with this… There are a lot of things which are being prepared and trust me; we would be able to monitor ExxonMobil.”
Statia noted that GRA is already arming itself with the requisite skills and systems that it would need for the job ahead. He declined to divulge details on the systems being put in place at this time.
Nonetheless, the GRA Commissioner General went on to state that GRA would be more than able to handle the influx of invoices to come from ExxonMobil. He said that those invoices would be in the electronic form and will be a direct feed into GRA’s system.
“Additionally, we have established a separate Oil and Gas department that is now being trained to oversee Exxon…So we have actually set that up. So without a doubt, GRA will be ready and it is preparing itself. We are not sitting and waiting.”
In terms of the pumping of the oil by ExxonMobil, Statia said that the Government would have to decide how it is going to be monitoring that aspect and who will be doing it.
“You have to decide if it is going to be Ministry of Natural Resources or some other unit but it won’t be GRA because we would be looking strictly at the expenditures, the revenue from those expenditures, the profit sharing methods and the royalties and those things.”
Statia said that the pumping of the 100,000 barrels of oil by ExxonMobil is a separate issue that the Ministry of Natural Resources has to address soon.
“…I am not trying to do the work they should be doing but there are indeed ways and means of monitoring ExxonMobil in that regard,” expressed the GRA Commissioner General.
The International Monetary Fund (IMF) in its 2017 review of Guyana’s economy issued cautionary words when it comes to oil and its murky nature.
Once all goes well with ExxonMobil, Guyana is expected to become an oil-producer by 2020. In 2015, ExxonMobil made a significant oil discovery offshore, which is conservatively estimated to hold between 800 and 1,400 million barrels. Commercial production is planned to commence by mid-2020, with an output of 100,000 barrels/day.
On that premise, the Directors of the Fund were encouraged by the Government’s expressed intention to create a “comprehensive framework” to manage oil wealth.
The Directors said that it is important that this framework be in place prior to the 2020 budget.
They said, “As a new oil producer starting from scratch, Guyana is in a good position to put in place a framework that limits pro-cyclical spending and attenuates the impact of oil price volatility on the budget and the economy. Other fiscal structural reforms related to public financial management, procurement, and investment are important, to ensure that the oil wealth is used efficiently.”
While the rest of the citizenry wait to hear of the details of the Government’s “comprehensive framework” for the oil sector, one can assume for the time being that the plan is one which entails the establishment of a Sovereign Wealth Fund (SWF), the strengthening of fiscal frameworks and systems at the Guyana Revenue Authority (GRA) and amendments to the relevant legislation.
Additionally, the local authorities have informed the IMF that they are working on other key elements of the fiscal regime, including drafting the Petroleum Law and establishing a Petroleum Commission. They intend to use future oil revenue to help meet key development objectives, based on a transparent and rules-based framework.
The authorities also reiterated their plans to anchor future oil wealth management in a comprehensive legal framework.
Furthermore, the International Monetary Fund was careful to stress on the importance of the Government putting in place, mechanisms to ensure the transparent spending of the oil revenue to come.
In this regard, Directors attached to the global organization emphasized that sound fiscal practices suggest saving a share of the oil revenue for future generations. They said, “Oil-financed spending should be transparent and channeled through the budget toward projects that enhance the economy’s physical and human capital”.
On a related note, the IMF commended the local authorities for drafting a Natural Resource Fund legislation and requesting the Fund’s technical advice on this topic.
IMF Staff still stressed the importance of transparency and good governance in the management of the oil industry and even welcomed the authorities’ plans to join the Extractive Industries Transparency Initiative and adhere to the Santiago Principles for Sovereign Wealth Funds.