The proposal by Professor Clive Thomas of the distribution of cash from the projected oil revenue to every Guyanese household caught me by surprise. With the proposed payout, there is every likelihood that the price paid for goods and services will invariably increase, thus reducing the real purchasing power to the beneficiary.
Firstly, we need to secure a new contract that will guarantee our country 10% of the gross revenue in the form of royalty. With approximately 4,000,000,000 barrels of high quality oil in our basin, it will extrapolate to 400,000,000 barrels paid to us in royalty. With an average price of US$60 per barrel, our revenue from royalty alone should be in the vicinity of US$24,000,000,000.
The cost of oil production varies around the world. The cost of producing a barrel for:
Saudi Arabia $9
Brazil $35 and
The UK $44
The cost for Guyana is not yet determined, but we can make an informed estimate that it will cost much less than the UK. I will use the cost of Brazil to assess our proposal, even though I believe that the cost to produce our oil will be much less. Our profit oil should be:
Price per barrel $60
Cost of production (35)
Profit oil 25
Capital spending 15
Profit to share $10
With the 50/50 formula, Guyana will get $5 per barrel x 4,000,000,000 = $20,000,000,000.
Estimated total revenue from our oil reserve using a selling price of $60 per barrel is $44,000,000,000
Now, let us talk of how the Guyanese public will benefit.
Firstly, there should be no handout. This will likely make us complacent and the brilliance of our people will be eroded.
1. Tax return must be filed by everyone who is of workable age
2. A refundable tax credit for each child below a certain age
3. A tax credit for earner with high income (amount to be determined)
4. Deductions for:
(i) Mortgage interest
(ii) Payment for school lessons
(iii) Payment to doctors, hospital
(iv) Payment to lawyers
(v) Payment of VAT
(vi) Mileage for car usage
(vii) Charitable contribution
(viii) Payment of alimony and child support
(ix) Dependent care expenses
5.Tax credit for education expenses
6. A refundable earned income credit for those
below a stated income.
These recommendations will go a long way for fair and equitable distribution of our new wealth.
In addition, the Government should bring our infrastructure to international standard. We need to increase wages and salaries bearing in mind the possible inflationary effect of such increases. I would also suggest that a fixed percentage of the revenue be placed in the Sovereign Wealth Fund for our future generations.