Any delegating of authority to GRA to audit transactions under Petroleum Agreement will raise legal and other questions

Dear Editor,

I congratulate Mr. Godfrey Statia, Commissioner General of the Guyana Revenue Authority for the tone of his letter in your pages – SN Sept. 7, 2018 `As an agent of the Gov’t for tax collection, GRA is acting as lawful delegate in auditing ExxonMobil.’ Without my stating it, the respect he expressed for me, and I am sure for Mr. John Seeram as well, is mutual and is based not out of friendship going back more than thirty years but out of my conviction that despite the exasperating bureaucracy that taxpayers are forced to deal with, Mr. Statia and his officers are doing a good job under challenging circumstances.

His was a response to my letter (SN Sept. 6, 2018 `GRA tax audit is no substitute for the audit of the transactions under the oil contract’) in which I distinguished between an audit by the GRA and one under what is popularly but incorrectly referred to as the ExxonMobil Contract. He acknowledged this only by implication by suggesting that the GRA can carry out this other audit by delegation from the Minister under Article 6.2 of the Petroleum Agreement which allows the Minister to delegate to Other Government entities the performance of these or any other duties under the Contract.

Mr. Statia states further that the “GRA as an agent of the Government for the purposes of tax collection, is therefore acting as a lawful delegate.” I find this proposition not only surprising but inconsistent with the ruling some twelve years ago by the Caribbean Court of Justice (CCJ) in the case Griffith v. Attorney General, confirming the decision by our own courts that although the GRA is a public corporation, the “[CCJ] is firmly of the view that the Revenue Authority is a new corporate entity distinct from the government”. This is reaffirmed at paragraph 40 of the decision which states that while the GRA is a public authority, “that status does not become synonymous with the government or with a government department”.

Equally troubling is that the GRA is either appointing itself as the delegate or that the Minister has so appointed it. If that is so, with all the debate taking place over the near one billion US dollars pre-contract costs, the public should be so advised. 

No one is doubting the capacity of the GRA to carry out audits. After all, its predecessors the Inland Revenue Department and the Customs and Excise Departments have been doing so for more than one hundred years under their respective legislation. But those were tax audits which are the exclusive function of the modern day GRA. The GRA seems now to wish to extend its mandate to do contract services for the Central Government which as a statutory body is particularly susceptible to public law and to the doctrine of ultra vires (outside of one’s legal power).

Moreover, no plausible reason has been advanced for Mr. Statia’s assumption that the Government will choose the GRA to audit transactions under the Petroleum Exploration and Production Act over its own constitutionally established Audit Office. In my view, such a reason must not only be plausible or convenient but must cross that threshold of being compelling and without reasonable alternatives.

In my letter I had also raised the issue of a potential conflict of interest if the GRA were to carry out separate audits under the Petroleum Agreement and the Tax laws. Clearly, the same GRA officers cannot do both so we will end up with two teams of the GRA auditing some of the same transactions applying professional judgements that could conflict with each other. It is like an audit firm being called upon to carry out a forensic audit after it has issued its opinion on the statutory audit.

The GRA may also be aware that any delegation by the Minister for the audit of the pre-contract costs is subject to the time limitation in paragraph 3.1 (k) of Annex C to the 2016 Petroleum Agreement under which the Minister had to agree such pre-contract numbers “on or before April 30, 2017.” Any delegation by Minister Harmon for belated audit of those numbers under the Agreement would conflict with the Agreement and be open to challenge.

Thankfully, the GRA acting lawfully and properly under the tax laws is under no such time constraint.

I am sure that Mr. Statia could not imagine any scenario under which the Internal Revenue Service in the United States would be called upon to conduct an audit of this nature,

Finally, I would have liked Mr. Statia to respond to my point that any disallowance by the GRA of the tax deductibility of expenses actually enhances the benefits of the oil companies.

Yours faithfully,

Christopher Ram  

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