…Mid-Year report records $3.9B growth in withholding tax
…largely reflecting payments from companies within the oil and gas sector

WITH oil production only months away, the country is already benefitting in the form of increased economic activity and significant taxes generated by the booming sector.
The Ministry of Finance’s 2019 Mid-Year Report records that for the first half of the year, withholding tax grew by $3.9B, or 65.9 per cent, largely reflecting payments from companies within the oil and gas sector.

“Personal income tax collections grew by $2B, or 16.4 per cent, when compared with the same period in 2018. Companies operating in the oil and gas sector accounted for $1.2B, or 61 per cent, of the collections.” At the same time, the increased economic activity meant VAT from domestic goods rose by $2B, primarily due to higher payments from the manufacturing, distribution, services and oil and gas sectors.

The report also noted an expansion in foreign direct investment (FDI), of 60.5 per cent to US$826.4M. The significant increase in FDI was largely supported by oil and gas activities, which accounted for US$354.6M of the amount. Imported capital goods increased substantially, from US$155.2M to US$423M, primarily attributed to a substantial expansion in mining machinery, again, supported by oil and gas activity.

Activities directly related to the oil and gas sector also contributed to growth in many sectors including finance and insurance activities, transportation and storage, and other service activities. There are also numerous spillover effects on other sectors such as construction, where there has been an increase in construction of commercial and residential properties to service the oil and gas sector. The rebasing of the GDP, which is currently underway and expected to be completed before the end of the year, will better allow for a quantification of the impact of oil and gas activities on economic growth.
Guyana is on the verge of becoming the world’s newest petro-state and potentially the richest, Bloomberg said in an article on Tuesday.

“In 2015, Exxon Mobil Corp. made what one of its executives described as a ‘fairytale’ discovery in the vast Stabroek exploration block off the Guyana coast. Since then, it’s found so much oil that by the mid-2020s Guyana, with a population of about 778,000, will probably produce more crude per citizen than any other country,” Kevin Crowley wrote in his article ‘The World’s Newest Petrostate Isn’t Ready for a Tsunami of Cash.’

Alluding to the Organisation of the Petroleum Exporting Countries (OPEC), Bloomberg noted that Guyana’s reserves would make it OPEC’s 12th-largest member after Angola. At the time of the compilation of the report, US oil giant ExxonMobil had projected that there were 5.5 billion barrels of oil equivalent resource in the Stabroek Block based on the finds to date, however, that figure that has been upgraded to six billion barrels. Based on 2018 statistics, Venezuela has the largest barrels of oil reserves with 302.8 billion followed by Saudi Arabia with 267 billion barrels and Iran with 155.6 billion barrels.

Bloomberg noted that at Exxon’s Investor Day meeting at the New York Stock Exchange last March, Guyana took centre stage. “It’s not hard to see why. Senior Vice-President Neil Chapman – the exec who’d once described the Stabroek find as a “fairytale” – pointed to a chart featuring estimates from Wood Mackenzie Ltd., an Edinburgh-based energy consulting firm. It showed that Exxon’s Guyana wells will be the most profitable of all new deep-water projects by major oil companies,” it observed.

Guyana’s economy, with a Gross Domestic Product (GDP) of $3.63B, a growth rate of 4.1 per cent in 2018 and 4.6 per cent in 2019, is expected to further grow by 33.5 per cent and 22.9 per cent in 2020 and 2021 respectively. This is according to the NASDAQ Stock Market, which is an American stock exchange. It is the second-largest stock exchange in the world by market capitalisation, behind only the New York Stock Exchange located in the same city. NASDAQ said, with a per-capita income of $5,194, Guyana is a middle-income country and is covered by dense forest. It is home to fertile agricultural lands and abundant natural resources. Gold, bauxite, sugar, rice, timber and shrimp are among its leading exports.