Management and Investment of Oil Revenues
It is now just over the halfway stage of the life of the current Parliament. In about the same time into the future, Guyana will join the club of petro states, catapulting to No. 9 on the list of oil producing countries, using the metric of per capita barrel of oil per day. Ram & McRae projects that in the first full year of production, the share of government revenue from petroleum will exceed twenty-five per cent. This is huge but not unusual among oil producing countries.
Budgeted Current Revenue for 2017 – illustrative impact of Petroleum
Of course, Guyana has long been a producer of non-renewable resources earning not insubstantial revenues and foreign exchange in the process. For decades, the revenues from those sectors were substantially collected not by the central government but by statutory bodies such as the Geology and Mines Commission (GGMC), the Guyana Gold Board and the Guyana Forestry Commission, each acting both as regulator and collector of taxes and fees. These moneys therefore found themselves in the Consolidated Fund by this indirect and inefficient route.
In the two and one half years since the announcement of the largest oil find in 2015, there has been no concluded parliamentary intervention in the sector, as a result of which the governing regulatory and fiscal framework for the petroleum sector is governed by two petroleum Acts, one passed in 1939 and the other in 1986, industry specific regulations passed in 1986, and the Income Tax Act. Meanwhile a Petroleum Commission Bill was tabled in the National Assembly and referred to a Parliamentary Select Committee. The Minister indicated that this is a priority for 2018 but there are likely to be substantial changes to the Bill if it is to serve the function of overseeing the oil sector within a framework of transparency and accountability.
The financial provisions of that Bill are not only opaque but are silent on the matter of profit oil which will be the largest single source of revenue from upstream petroleum operations. Paragraph (4) (b) of Clause 4 of the Bill setting out the responsibility of the proposed Commission speaks only of “the collection and recovery of all rents, fees, royalties, penalties, levies, tolls and other charges”. This does not appear to include the share of profit oil which Guyana will receive.
Under the terms of the existing Petroleum Agreements, oil companies will pay no Corporation Tax but they will receive a credit for deemed Corporation Tax paid. Presumably the Guyana Revenue Authority will make a book entry for, and treat the tax as paid over to the Consolidated Fund. In the absence of an amendment to Article 216 of the Constitution, the proceeds of profit oil less the deemed Corporation Tax, will also