Guyana should join OECD convention to tackle tax avoidance and evasion by oil companies – academic paper
By Kemol King
An academic paper has revealed a recommendation by Chartered Professional Accountant Tameshwar Lilmohan that Guyana’s tax relations with multinational oil companies will work out in the favour of the people, if the country becomes a party to an international convention that will equip it to more comprehensively tackle tax evasion and tax avoidance.
Chartered Professional Accountant, Tameshwar Lilmohan
The Organisation for Economic Cooperation and Development (OECD), in conjunction with the Council of Europe, had jointly developed the Convention on Mutual Administrative Assistance in Tax Matters.
The Convention is a multilateral instrument that facilitates better operations of national tax laws, with methods ranging from the exchange of information, including automatic exchanges, to the recovery of foreign tax claims.
Lilmohan presented the paper titled ‘Costs and Benefits of Tax Incentives by Developing Countries to Multi-national Enterprises’ at Osgoode Hall Law School earlier this year, for the completion of his double Masters degree in Law. The paper’s case study is the Petroleum Agreement between Guyana and ExxonMobil.
In that paper, Lilmohan states that contractual bargains between Governments and multinationals like ExxonMobil result in rates and preferences that are arrived at in situations where the imbalance of information and experience the country has, sways the bargaining power in favour of the multinational enterprise.
He goes on to write that these companies are skilled at structuring their legal framework so that the low tax or tax-free income from these countries are channeled to their resident country that charge no or low corporate income tax.
He alluded to a situation in Guyana where the Government intends to, in addition to waiving a series of taxes for oil companies, give the companies tax certifications which will grant them reductions in taxes in their home country.
Guyana has very limited tax treaty agreements, Lilmohan noted. He is of the opinion that this one would be extremely useful.
The OECD Base Erosion Profit Shifting (BEPS) Action 13 Framework, under the convention, is the centre of Lilmohan’s recommendation. It was facilitated because the lack of quality data on corporate taxation has been a major limitation to measuring the fiscal and economic effects of tax avoidance, making it difficult for authorities to carry out transfer pricing assessments on transactions between linked companies and even more difficult to carry out audits.
The Convention currently has 128 participating jurisdictions, the paper states.
“Had Guyana been a member it could have benefitted from the Convention’s peer review arrangement,” Lilmohan wrote.
“The peer review would have ensured that the Petroleum Agreement was evaluated and implemented to a standard consistent with an agreed set of criteria and methodology. The terms of reference of the Convention requires participating jurisdictions to be transparent with the information and frowns upon secret tax rulings.”
The waivers granted under the Stabroek Production Sharing Agreement (PSA) to Exxon and its partners has been heavily criticised.
An engineer, Darshanand Khusial, indicated, in a recent letter to the editor, that Guyana could have easily secured US$35B in taxes from the operators of the Stabroek Block, from their profits on the current discovered reserves in the Block.
“That is more than enough to provide world class services to our… citizens,” Khusial had stated.
Lilmohan’s paper can be accessed using this link: https://docs.google.com/viewer...udy.pdf&hl=en_US