Understanding Energy | GRA’s comments reveal complexities in tax concession debate


WITH Guyana soon to see first oil production, conversation regarding industry preparedness continues to pick up steam. Local content remains a particular area of focus as Guyanese businesses position themselves to provide services and support for the offshore production industry. Many of these businesses could gain access to tax concessions for working in the oil sector, helping them compete for work.

Yet, access to these tax concessions for local businesses has become a contentious issue in recent weeks. News reports have revealed widespread concern that Guyanese companies are not receiving the same access to tax breaks as foreign firms. But it appears that the problem is one of awareness, not access.

Godfrey Statia, Commissioner General of the Guyana Revenue Authority (GRA), recently sought to clarify that local companies have access to exactly the same tax concessions for participating in the oil sector. Statia explained that the problem is simply that only one local company has applied for access to those tax breaks. The fact that so few local companies have requested tax breaks is concerning, according to Statia. Any local company supplying the sector, provided it pays a duty and can prove that it provided petroleum-related materials to an industry operator, can receive a credit.

The GRA has explained that it is willing to grant tax concessions for local companies even before the government’s local content policy is finalized. This should be reassuring to local businesses.

Statia emphasized this point, saying that the GRA “will not wait around for a Local Content Policy. [We] have also had meetings with the Georgetown Chamber of Commerce and Industry (GCCI), the Guyana Manufacturing Services Association (GMSA) and all of them.”
Of course, the existence of tax exemptions also raises allegations of misuse. Here again, Statia has been adamant that the GRA has established a “rigid” monitoring and reporting system to manage tax concessions. Such a system is critical for ensuring that companies, either domestic or foreign, do not gain unfair exemptions. This monitoring and reporting system is also applied to the international oil companies themselves. The GRA is carefully tracking and evaluating all concessions made to oil companies and their contractors. Continual check-ins will be conducted to ensure that concessions are being correctly applied.

These kinds of concessions are important in a country like Guyana that wants to encourage as much local content as possible. Statia was enthusiastic about the participation and cooperation of international companies, saying they have been “extremely compliant” with tax concession rules so far.

But even without applying for concessions, Guyanese companies are having success and the numbers show that more than 1,700 Guyanese are working in the energy sector already and more than 600 local vendors have engaged in supporting the sector, according to the Center for Local Business Development. Raising the level of awareness around programs like local tax concessions is a crucial part of making sure that the Guyanese business community can continue to succeed and take advantage of every opportunity that our new oil industry can provide.