Is the NRF really overstated?

The issue of whether amounts should be paid out of the Natural Resource Fund (NRF) as taxes or not has recently been ventilated in the press by Mr. Ram, the Attorney General (AG) and Joel Bhagwandin. These gentlemen, but mostly Joel has quoted extensively from the Fiscal Management and Accountability Act (FMAA), Petroleum Agreement (PA), the Income Tax Act (Cap 81:01) and the Corporate Tax Act (Cap 81:03), Revenue Authority Act and the Natural Resource Fund (NRF) Act. It all started with Mr. Ram’s position that the PA obligates Guyana to pay the taxes of the oil companies from oil revenues in the NRF, and since the NRF Act has no such provision, the funds in the NRF is overstated. The AG has argued that the NRF Act only allows for transfer to the Consolidated Fund and has a supremacy provision which gives it overriding powers. He also stated that it does not matter if the tax payments go to the NRF or the GRA, they end up in the Consolidated Fund.

In my humble opinion: 1) Joel’s submissions in print and social media did not shed any light on the matter and will not be considered and 2) Mr. Ram’s letter last letter with 10 questions and 3 concerns to the AG was farfetched with respect to the question of the overstatement of the NRF.

In trying to understand this issue of the tax payments and whether the NRF is overstated, let us take a common-sense approach and look at the substance of these transactions. The oil companies’ taxes (to which they are subject) are paid out of profit oil. The Minister of Natural Resources is then required to remit such taxes to the GRA so the tax certificates can be issued. However, these payments go to the NRF in which Act there is no provision to pay taxes to the GRA. Funds from both the GRA and the NRF ends up in the Consolidated Fund, hence, it can be argued that portion of the funds from the NRF are actually payments of oil companies’ taxes (bypassing the GRA).

Is it not taking from one hand and giving to the other hand of the same person (state coffers)? The above supports the AG’s contention that whether monies are paid to the GRA as taxes or are paid to the NRF, they end up in the Consolidated Fund. However, I do not agree that it is only of academic importance; but it is not such a big deal for OGGN. Of course, Mr. Ram has raised a legitimate concern but there are many safeguards and oversight in the NRF Act. So, is the NRF really overstated?