GEORGETOWN – Vice President (VP) and Chief Policy maker in the oil and gas sector, Bharrat Jagdeo maintained his government’s position that windfall taxes will not be instituted at this time. Windfall tax is a tax levied by governments against certain industries when economic conditions allow those industries to experience above average or projected profits. Jagdeo, in response to a question posed by Kaieteur News on why the government is not implementing windfall taxes since it does not breach the existing Production Sharing Agreement (PSA) with ExxonMobil and its partners, Jagdeo said: “I have dealt with windfall profits in the past, and why we believe that windfall taxation should not be pursued at this time. I dealt with it in the past, if you go back and read.”
In May 2022, Kaieteur News questioned the Vice President on the issue and at that time he admitted that citizens in Canada, and the United States had forced their governments to increase their royalties charged to oil operators. In the United Kingdom, the government increased the one-off tax slapped on oil companies. At that time, this publication reported extensively on the changes in the fiscal regimes for the oil operators in those countries. Canada had moved its royalty charged between five and 40%, the US in December of 2021 raised its royalty rate higher than the 18.75% it had been receiving while the UK slapped a one-off 25 percent tax on the oil companies there. Jagdeo had told the media that the windfall tax that some countries are exploring only came after intense pressure from their populations. However, he explained why the institution of the tax could not be replicated in Guyana. “We are bound by a PSA with very specific terms on the taxation side.” To this end, he suggested “if you change the taxation here, it’s considered a breach of the contract.”
Seeking to draw a distinction between Guyana and the ABC countries, Jagdeo suggested that the oil companies would have been operating for decades in those jurisdictions and as such would have come under the standard tax regime for the respective countries within which they operate. According to the Vice President, under such a situation the parliaments of those countries could by way of legislation easily make the changes to institute for example a windfall tax. He was adamant, this is the key reason the same cannot be done in Guyana if the administration did in fact go ahead and make the legislative changes; it would be considered a breach of the contract and “we would run afoul of the agreement.”
Notwithstanding, the occurrences in other oil producing countries, Jagdeo remains firm in his stance that going after windfall taxes will affect the sanctity of the contract, despite industry experts sharing a different opinion. Trinidadian Energy Expert and International Consultant, Anthony Paul recently shared his perspective with Kaieteur News. (Kaieteur News)
Photo: Vice President Bharrat Jagdeo. (Kaieteur News)