ECNETNews, NEW YORK, NY, Mon. Feb. 17, 2025: Significant concerns have emerged regarding ExxonMobil’s tax practices related to its operations in Guyana. The U.S. Foreign Tax Credit (FTC) program, intended to prevent double taxation, allows corporations and individuals to offset foreign taxes against their U.S. tax liabilities. However, evidence suggests that ExxonMobil may be obtaining tax certificates from the Guyana Revenue Authority (GRA) without actually paying the corresponding taxes in Guyana. The Oil and Gas Governance Network Guyana (OGGN) has raised alarms that these certificates could potentially be utilized to illegitimately claim FTCs from the U.S. Internal Revenue Service (IRS), which could result in substantial losses to the U.S. Treasury amounting to billions of dollars.
Guyana’s Tax Agreement with ExxonMobil
Under the 2016 Petroleum Agreement (PA) between the Government of Guyana and ExxonMobil, along with its partners Hess Corporation and China National Offshore Oil Company (CNOOC), the government has committed to covering the taxes owed by these oil companies from its share of oil revenues. Key provisions include:
• Article 15.4 mandates that the Minister responsible for Petroleum will pay taxes on behalf of the Contractor, which includes ExxonMobil and its affiliates.
• Article 15.5 ensures that the GRA issues tax receipts and certificates to confirm such payments.
Consequently, ExxonMobil and its affiliates have effectively avoided direct payment of corporate income taxes, benefiting from approximately USD 2.8 billion in tax certificates between 2020 and 2023. This arrangement has led to 78% of Guyana’s total oil revenues being allocated to tax payments for foreign corporations, leaving the country’s actual revenue from oil sales at a mere USD 0.8 billion, equivalent to just 3.2% of total oil sales.
Legal and Financial Concerns
The core issue raises questions about the legitimacy of ExxonMobil claiming U.S. FTCs based on tax certificates received without genuine tax payments. This situation may breach U.S. tax regulations, specifically:
• 26 U.S. Code §901, which necessitates actual payment of foreign taxes for FTC eligibility.
• IRS regulations on economic substance (26 U.S. Code §701(o)), which require transactions to have legitimate economic benefits beyond tax avoidance.
Without actual tax remittances to the Guyanese government, ExxonMobil’s claims for FTCs remain legally problematic. Although there may be an argument that this tax structure complies with Guyanese law, the IRS’s stringent requirements for actual tax payments further complicate matters. Additionally, the absence of documented evidence showing that the Government of Guyana has paid these taxes fuels the claim that the tax certificates issued to ExxonMobil lack reliability.
Conclusions and Recommendations
The tax arrangement benefiting ExxonMobil is notably unique, as other companies operating in Guyana do not enjoy similar advantages. In light of these developments, OGGN has called on U.S. authorities to:
- Launch a formal investigation into ExxonMobil’s use of tax certificates issued under the 2016 PA.
- Direct the IRS to evaluate the compliance of ExxonMobil’s claimed FTCs with U.S. tax laws.
- Conduct hearings or propose legislation aimed at preventing similar arrangements that may deprive the U.S. Treasury of critical revenues in the future.
Potential losses to U.S. taxpayers over the 40-year period of the PA could reach into the tens of billions of dollars, underscoring the importance of tax fairness in promoting transparency and corporate accountability.
