Despite IMF’s advice… Trotman says Petroleum Commission will still meddle in revenue collection

Feb 01, 2018 News, https://www.kaieteurnewsonline...-revenue-collection/

Even though the International Monetary Fund (IMF) suggests otherwise, it appears that the government is still going to maintain that the Petroleum Commission be given fiscal powers. This was recently confirmed by Minister of Natural Resources, Raphael Trotman.

He was at the time, responding to questions from Kaieteur News. This publication asked the Minister to confirm if all revenue powers in the petroleum sector would go to the Guyana Revenue Authority (GRA) or if it would remain split between that entity and the imminent Commission.

Trotman said, “There are some grey areas…like the Guyana Geology and Mines Commission (GGMC) collects all fees which are paid, licensing fees etc. The intention is for the (Petroleum) Commission to collect licensing fees. Revenues which are earned from petroleum will be handled by GRA. So that matter will be better defined… The commission will collect fees and penalties charges.”

THE BILL AND IMF
The Petroleum Commission Bill which is before the National Assembly will pave the way for the establishment of a regulatory body for the oil and gas sector. The Bill sets out various functions and duties of the Commission, one of which includes revenue collection and other fiscal powers.

According to the Bill, the Commission shall: ascertain the cost oil or gas due to operators; participate in the measurement of petroleum to allow for estimation and assessment of royalty and profit oil or gas due to the State and be responsible for the approval of the exercise; provide the necessary information to the relevant authority for the collection of taxes and fees from petroleum operations; be responsible for the collection and recovery of all rents, fees, royalties, penalties, levies, tolls and any other charges payable under the Petroleum (Exploration and Production) Act and any other revenues of the Commission; and advise the Minister of Natural Resources in the negotiation of petroleum agreements and in the granting, amendment, renewing, extending, and revocation of licenses.

But the International Monetary Fund is opposed to this idea. It is of the view that the Commission should only stick to being a sector regulator and not meddle in revenue collection matters.

The Fund said that the GRA should be dealing with such matters. The IMF said that the Government also agrees that the tax entity should be the only revenue-collecting agency for the oil and gas sector. The IMF said if the intention is to have the GRA as the single revenue collection agency for the petroleum sector, the Bill should be amended.

It said, “Given Guyana’s limited exposure to the petroleum sector and the scarcity of specialized human capital among government ministries and agencies, resources should be used efficiently and strategically. The mission supports centralizing the fiscal administration of the sector (including Production Sharing Agreements (PSAs) in the GRA. The proposed Petroleum Commission, however, should be responsible for regulating all non-fiscal aspects of the petroleum sector.”

“Even with a single revenue collection agency, coordination between the Petroleum Commission and the GRA is essential. As the sector regulator, the Petroleum Commission will develop a deep technical knowledge of the petroleum sector in Guyana. This technical knowledge will be of great benefit to the GRA in administering PSAs and taxes for the sector.”

OTHER FLAWS
Like most pieces of legislation in draft mode, the Petroleum Commission Bill has its fair share of flaws. But the most disturbing of them for local anti-corruption advocates and advisors pertains to the uncapped authority given to the Natural Resources Minister.

Not only will the Minister have the power to select the members of the Petroleum Commission, but he can also select and appoint the members of the Board along with its secretary. In fact, the Minister can even disrupt the work of the Commission as he pleases.

These very concerns were raised during a consultation on oil and gas development and the Petroleum Commission Bill last year. The speakers included former Minister of Energy for Trinidad and Tobago, Kevin Ramnarine; former Speaker of the National Assembly, Ralph Ramkarran and GCCI President, Deodat Indar.

In his presentation, Ramnarine noted that the Petroleum Commission is tasked with monitoring and regulating the efficient and environmentally responsible exploration, development and production of petroleum in Guyana.

He said that some of its main functions include; Approving proposed exploration activity, carrying out estimation of reserves, promoting local content, overseeing third party access to infrastructure and providing information to tax authorities.

The former Energy Minister then highlighted the control the Minister has over the appointment of staff for the Petroleum Commission. He noted that the Commission will have a Board of Directors (BOD) that is expected to govern or supervise the Commission. But all of the Board members would be appointed by the Minister.

According to the draft legislation, the Chairperson shall be appointed by the Minister while the Deputy Chairperson may be appointed by the Minister. He noted that in the case of the chairperson, this is definite, while in the appointment of the deputy, it is optional for the Minister.

The Board is also directed by the Minister. Ramnarine also pointed out the fact that the Board would have a life of one year and the Minister has the power to terminate it at any time. The Minister can also perform the functions of the BOD if one is not appointed. He can even assume the Chairmanship in the absence of a Chairman.

Also worrying to Ramnarine, is the fact that the Minister would have the authority to appoint a Chairman, the Commissioner, eight other directors, and the secretary to the board.

On the bright side, the former Energy Minister said that the draft legislation calls for the Board of the Directors to include one person from the parliamentary opposition and one from civil society or academia.

Former Speaker of the House, Ralph Ramkarran agreed with Ramnarine’s points. He surmised that the legislation essentially gives the Minister “a heavy hand” in the staffing and operation of the Commission when in fact, he is only supposed to have “a light touch.”

Ramkarran said, “One can understand that the government wants control. I am not quarreling with this…but it is not normal for Ministers to be approving the secretaries of boards.”

The Senior Counsel asserted that what he also found peculiar was the fact that the draft legislation speaks nothing of the size or the number of persons who would make up the Petroleum Commission. It is only specific that eight persons would make up the Board.

As it relates to recommendations, Ramnarine suggested that the term of the board be longer than one year. He and Ramkarran agreed that it is the Board which should appoint the Commissioner as well as its secretary. In relation to the latter, Ramnarine noted, however, that the secretary should be an attorney with at least 15 years at the bar.

The former energy Minister agreed that there should be a Board member from the Opposition, but he or she should be appointed by the Minister based on the written advice of the Opposition Leader.