— If not, why not?

Key Message Supporting Statement (s)
The fiscal regime applied to the oil and gas sector in the United Kingdom prior to the introduction of the windfall tax (energy profits levy) in May 2022, comprised of three elements, namely (1) ring fence corporation tax (RFCT), (2) petroleum revenue tax (PRT), and (3) supplementary charge (SC).

It is normal practice universally for petroleum-producing countries to design a separate fiscal regime specifically for the oil and gas industry that is usually different from the mainstream fiscal regime applied to companies operating in other sectors. This is the case in the United Kingdom and in Guyana. Important to note as well is that there are different types of fiscal regimes that can be applied to the oil and gas industry. Notably, the PRT was reduced from 50 per cent in 1993 to zero per cent in 2016. Importantly, in the interest of a comparative illustration to demonstrate whether the application of a “windfall” tax in Guyana has any merit and justification to so do; this analysis seeks to demonstrate a practical application of the UK’s fiscal regime inclusive of the windfall tax and compared to Guyana’s fiscal regime. In so doing, however, it is crucial to understand that some elements of the fiscal regime in the UK are not comparably applicable to Guyana for the reasons outlined further in this report.

The net revenue obtained under the current fiscal regime applied to Guyana versus the fiscal regime applied in the UK inclusive of the recently instituted windfall tax of 25 per cent in the UK, resulted in a higher share for Guyana in contrast to the UK. For illustration purpose, with a profit of US$756 million, the net take for the UK Government is US$226.8 million. Contrastingly, with the same profit oil of US$756 million, applying Guyana’s fiscal regime which is two per cent royalty and 50 per cent profit, Guyana’s Government net take amounts to US$438.5 million. This is US$211.7 million more than that which is obtained for the UK Government or 93.3 per cent more. Also, with the application of the 25 per cent windfall tax, the UK’s Government net take using the same scenario of profit oil amounting to US$756 million, the net take amounts to US$415.8 million which is still US$23 million less than Guyana’s Government’s net take.

Concluding Remarks.