Prominent fuel distributor owes state $3.2B in taxes

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…GRA seeks AG’s help amid widespread abuse of fuel exemptions

In the wake of rampant abuse of the fuel import tax exemption system and a prominent distributor owing the State over $600 million in taxes, the Guyana Revenue Authority (GRA) has sought the intervention of the Attorney General’s chambers.

This came to light in correspondence between GRA Commissioner General Godfrey Statia and Finance Minister, Dr Ashni Singh, in which Statia brought the Minister up to speed with the fuel import racket uncovered before last year’s change in Government.

GRA has a system in which large-scale fuel companies would act as distributors, importing fuel and then receiving tax exemptions for fuel it sold to various businesses that were eligible for partial or full exemption – businesses that included foreign investors.

Guyana Revenue Authority (GRA), Commissioner-General, Godfrey Statia

But according to Statia in the letter, checks by GRA’s Law Enforcement and Investigation Division (LEID) showed that these distributors were only delivering part of the fuel to these companies, even though the distributors were clearing the fuel at the duty-free rate using the companies’ tax exemption letters. It is speculated that this fuel would then be sold to others, where it would fetch a duty paid price.

Statia revealed that this was occurring as late as 2020, whereby fuel was imported for oil companies but the companies did not receive much of it. As a consequence, the distributor owed over $2.6 billion worth of taxes for the non-delivered fuel.

This sum is currently under review and awaiting a final decision. It is understood that this abuse of the system, with regards to oil imported for oil companies, dates back as early as 2015.

The Commissioner General further revealed that for the period of January 1 to September 30, 2020, one prominent distributor imported close to 35 million litres of oil on behalf of a company in the extractive industry, using that company’s tax exemption letter.

However, the records submitted by both companies revealed that only 20.6 million litres of oil was ever delivered. According to Statia, based on the reconciliation it was found that the distributor owed $606.9 million on the 13.8 million litres of oil it did not deliver for the intended purpose.

Minister of Finance Dr Ashni Singh

It was further explained than when GRA wrote to the company, it accepted liability but claimed that it had previously supplied more than 24 million litres of duty paid fuel at a duty-free price to the particular extractive company, without exemption letters. Checks by GRA could only account for 20.3 million litres.

“GRA should find a way to prosecute the company, and recover duties and interest applicable based on the abuses. I am therefore of the view that the Attorney General’s opinion should be enlisted in considering the way forward,” Statia advised in the letter, which was copied in emails to President Dr Irfaan Ali, Vice President Bharrat Jagdeo and Attorney General Anil Nandlall, SC.

Loopholes

Further, the tax boss recommended to Dr Singh that a previously implemented system of reconciling fuel imports be implemented, in order to tighten loopholes that allowed these distributors to abuse the system.

According to Statia, a system had previously been implemented in which each payment would be cleared with an attached computation showing imports, exemptions, versus acquittals and the distributor would submit a monthly schedule specifying which companies received the fuel. But Statia revealed that attempts to implement this system were stymied by the non-cooperation of his own custom officers and the distributors themselves.

“Suffice to say that notwithstanding the agreement reached regarding the aforementioned process, the oil importers expressed reservations and gave every reason as to why this new requirement should not be thrusted upon them (for obvious reasons),” Statia explained.

“There was also pushback by Customs officers who for one reason or another did not see the need or understood the rationality for the change, or resisted the changes for their own gain. This led to a piecemeal approach and the eventual return to the old system. Hence the reason for the recommendation for its imposition.”

He also explained that GRA officers will be reviewing the back years, from 2015, to reconcile all fuel cleared using exemption letters and also verifying that these letters were not used by more than one distributor or that there was no collusion between them and the companies on whose behalf the fuel was imported.