–GRA recommends prosecution, recovery of duties and interest applicable based on the abuse

THE Guyana Revenue Authority (GRA), following a reconciliation of exempted fuel against acquitted fuel, has found that several major oil importers, namely SoL, Rubis and GuyOil, were utilising exemption letters to clear fuel without regard for whom the fuel was destined.

The Sunday Chronicle was privy to a letter signed by GRA Commission-General Godfrey Statia, which stated that it was the practice of the revenue authority for several years to allow the major oil companies to import and enter tax-exempted fuel for various businesses which benefitted from partial or full exemptions on fuel.

The oil companies, should they choose to do this, are required and expected, among other things, to deliver the full exempted quantities imported and entered to all such beneficiaries, who, in turn, are expected to utilise said quantities for the intended purposes.

But, in recognising that there was a breach in protocol, Statia, in 2017, had instructed the Law Enforcement and Investigation Division (LEID) arm of the GRA to pay regular visits to the beneficiaries’ places of business to ensure that the fuel was being utilised as intended.

“In doing so, and during the reconciliation process, it was discovered that the import and clearing of fuel through the PID [Permission For Immediate Delivery] system was flawed, since oil importers were utilising exemption letters to clear PIDs without regard to whom the fuel was destined for, i.e., whether the fuel was fully exempted, partially exempted, or subjected to the tax,” the Commissioner-General said in the letter which was addressed to Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh.

This discovery prompted a request for explanations, to which the oil importers responded by saying that the fuel was being held in so-called “virtual tanks” for delivery to the beneficiaries as and when needed.

“This explanation shows distinctly that there was commingling, and the oil importers were abusing the system, whereby not all exempted fuel cleared by the importer was being acquitted by the beneficiary, thereby allowing the oil importer to benefit from increased cash flow by not paying the government on the required basis,” Statia said.

The LEID and Customs, Excise and Trade Operations (CE&TO) were again instructed to commence reconciliation exercises between the fuel importers and fuel beneficiaries, beginning with the major beneficiaries, namely Guyana Gold and Diamond Miners Association (GGDMA), Bosai, AGM, Rusal, and in late 2020, ExxonMobil.

STARTLING RESULTS
The results of the reconciliation exercises were described by Statia as startling, as it was found that in each case, a trend was observed whereby some of the major oil importers would have imported and entered the fuel at duty-free rate, using the beneficiaries’ tax exemption letters, but failed to deliver the full quantities to the beneficiaries as required.

In the case of ExxonMobil, evidence has so far revealed that since 2015, the system was being abused by SoL Guyana Inc. It was found that the exemption letters were being utilised by SoL to clear fuel, but the full quantity was not being delivered to the beneficiary.
Also, for the period January 1, 2020 to September 30, 2020, a total quantity of 34,554,080 litres of gas oil was imported and duly entered by Sol Guyana Inc., using both Bosai companies’ tax exemption letters.

Of this quantity, Statia said certified records submitted by SoL Guyana Inc. and both Bosai companies revealed that only the accumulated quantity of 20,691,379 liters was delivered to the beneficiaries. This meant that the remaining 13,862,701 liters should have stayed in SoL’s possession.

“To this effect, and based on the incontrovertible evidence obtained, the revenue authority demanded the forgone excise tax, in the sum of six hundred and six million, nine hundred and seventy-eight thousand, three hundred and sixty-three dollars ($606,978,363) on the 13,862,701 liters of gas oil which was imported duly entered free of excise tax and was not delivered to both Bosai companies to be utilised for the intended purpose,” Statia lamented.

In an email dated November 27, 2020, Sol Guyana Inc. accepted the liability, but alleged that in past periods, notably during 2018-2019, it supplied in excess of 24 million liters of duty-paid diesel at duty-free prices to both Bosai companies without exemption letters.
When this quantity was reconciled, the GRA found that only 20.3 million liters was supplied, clear evidence that Sol Inc. does not keep adequate records of acquittals.

The GRA officers are still examining Bosai’s exemption records to see whether the company acquitted fuel from other importers in 2018 and 2019, since they were in receipt of exemptions during the period claimed.

Considering the extent of abuse uncovered by the authority, Statia recommended that GRA should find a way to prosecute the company, and recover duties and interest applicable based on the abuses. The Attorney-General, Anil Nandlall’s advice would be sought in moving forward, the GRA boss said in his letter to Dr. Singh.