Senior Minister in the Office of the President with responsibility for finance, Dr. Ashni Singh said government intends to address disparities in the tax system which have disadvantaged local companies against their foreign counterparts in the oil and gas sector.
He made the statement during his presentation of Budget 2022 on Wednesday.
“This will help improve the competitiveness of Guyanese companies, help secure business opportunities for them, and thereby create jobs for Guyanese nationals,” the Minister said.
The intervention will bring long sought relief to locals who have been swimming against the tide in the industry for years. It follows the passage of the Local Content Act in December, which demands that a significant portion of services and employment be set aside for local workers and companies.
“When we were considering the Local Content Act, one of the recurring issues that arose was the question of ensuring that Guyanese businesses are not in a disadvantageous position relative to their international counterparts in competing for contracts with the oil and gas sector. This could arise, for example, where the sector is procuring a service and the international companies tendering to supply that service enjoy a particular tax treatment on the importation of their capital equipment to provide that service that Guyanese companies might not enjoy.”
Leaders in the private sector have explained that this would result in a disparity, where locals are forced to absorb the cost of taxes into their profit margins, while foreign companies get off scotch-free, making it difficult for locals to offer competitive prices to contractors.
This disparity is due to the tax breaks which are owed to contractors and their sub-contractors in the oil and gas sector, due to the licences granted to them to operate oil blocks offshore Guyana. All oil block licences have granted these blanket tax waivers to contractors.
Vice President Dr. Bharrat Jagdeo has acknowledged that the tax breaks granted to licencees and their sub-contractors are too liberal, and has committed that when the government moves to grant future licences, it will leverage Guyana’s strong negotiating position to secure more tax revenues for Guyana. [Extracted and Modified from DPI]