The Guyana Telephone and Telegraph Company Ltd (GT&T) should make public full details of the services that were provided by its parent company (ATN) to the local company in exchange for the billions of dollars of advisory fees which were paid, over the years, at a rate of SIX percent of gross revenue.

This call was made by Minister of Finance Dr. Ashni Singh in response to a story published yesterday in Kaieteur News which sought to highlight the company’s contribution to the national treasury. Minister Singh described the article as a distortion and exaggeration of the facts.

Citing as an example of the way in which the article attempts to exaggerate the company’s contribution to the national treasury, the Minister pointed out that the value-added tax and previous consumption tax on telephone calls are paid by GT&T’s customers and not by the company. The company merely collects the amounts concerned from its customers for remission to the Treasury. It would therefore be incorrect to suggest that these amounts represent a contribution by the company to the public treasury. In other words, in so far as the amounts totalling G$7.1 billion that are described as VAT/consumption tax represent the VAT and consumption tax previously paid on telephone calls, these amounts are not a contribution of the company.

Secondly, the Minister pointed out that corporation taxes are an obligation that would have to be met by the company regardless of the identity of its owners. Indeed, the level of corporation tax reflects the level of monopoly profits that GT&T has been enjoying based on its 20 year monopoly which is up for renewal in December 2010. Over 1999 to 2008, on sales of G$165 billion, GT&T paid a total of G$29 billion in corporation taxes. Irrespective of who owns the company, corporation tax would have to be paid on the profits made.

In respect of dividends, GT&T paid absolutely no dividends to Government for the first 10 years of its operation, and only started paying dividends in 2000.

In addition, GT&T has paid to ATN almost G$30 billion as a shareholder in the form of dividends and advisory fees in just the last 10 years. Of this amount, ATN has received advisory fees of six percent or almost G$10 billion. Additionally, ATN has received dividends of over G$19 billion. As such, ATN has received almost G$30 billion on its investment for the last 10 years alone. Government considers all of this to be profits.

On the subject of the advisory fees, the Minister pointed out that GT&T does not pay any taxes to the domestic treasury on the advisory fees, since these are deducted as an expense before the computation of taxable profit. Based on the level of advisory fees, if these were treated as a distribution of profits, additional corporation tax of G$4.5 billion would be due to the Treasury. Additionally, Government, as a 20 percent shareholder, would be entitled to a further G$2 billion in dividends. Most recently, Government voted against the GT&T accounts on the basis that these fees are not considered legitimate expenses, but are another form of distribution of profits to ATN.

Government reiterates its call for the company to disclose publicly full details of the services that were provided by ATN to GT&T to justify the payment of these advisory fees.

Government wishes to make clear that its proposed sale of its 20 percent will not affect the taxes or license fees paid by GT&T, and will similarly have no implication for the VAT collected on telephone services.

Government will continue to push strongly for liberalisation so that consumers can enjoy more competitive prices, and so that the cost of bandwidth will be lowered by competitive forces to facilitate investment and job creation in the ICT sector. Government expects that with liberalisation, GT&T’s current monopoly profits will be reduced, and customers will receive better value. Consequently, now is the best time for Government to dispose of its 20 percent share and use the proceeds to improve the ICT sector. (GINA)