Govt drafting law to clamp down on companies’ rotation of foreign workers to avoid taxes
…as amendments to Local Content Act expected in 2025
The People’s Progressive Party/Civic (PPP/C) Government is beginning to clamp down on companies which are rotating foreign workers to avoid remitting taxes to the Guyana Revenue Authority (GRA).
In a stark warning to these companies, Vice President Bharrat Jagdeo put them on notice during a press conference on Wednesday that the Local Content Secretariat has received evidence that a number of large companies supplying the oil and gas industry were culpable of this practice.
“So, there are some companies that may be looking at this today. And they have a lot to worry about in the future. I’ve seen evidence that is available to the Local Content Secretariat, where they have a long list of … who are rotating workers. And a lot of them are in management. Now the laws say to qualify for a local content certificate, you have to limit the management to 25 per cent foreigners and 75 per cent of your management has to be Guyanese.
“In the first couple of years, we gave some waivers, because already, companies had contracts with ExxonMobil and the changeout would take some time. But this has become a loophole for some of them, to bypass the legislation. So, they’re bringing in long lists of foreigners as rotating workers. They’re getting work permits for them,” Jagdeo said.
According to Jagdeo, the Government believes this is being done for two reasons. One is to bypass the Income Tax Act, which requires persons to be resident in Guyana for six months in order to be eligible to pay income tax. If persons are rotated out of the country before that six-month period is up, it means no income tax for the State.
“And then sometimes they bring them back the following year or bring new people. So, I spoke with the Commissioner (of GRA). And we’re now drafting legislation that will cover that loophole. Because that used to be in our Income Tax Act. So that’s one. So that people that come to work for the oil and gas sector, they can’t use this creative mechanism of rotating the foreign workers to avoid paying taxes.
“Secondly, those Guyanese companies who have a local content certificate, they have to place these people, the rotating workers, in their management structures. And then apply the formula of 25/75. That’s one of the criteria for qualifying as a local company. And if they don’t meet the criteria, they may lose their local content certificate,” Jagdeo explained.
Legislative updates
The Vice President also spoke of the Government’s planned updates to the Local Content Act, for which consultations have already started in some parts of the country. According to Jagdeo, the amendments to the Act are expected to be finalised by next year and further, they are looking at proposals that include increasing the percentage of work that companies in oil and gas have to give to locals, as well as the range of sectors.
“So, we were thinking about increasing the percentages there and maybe adding new sectors. So, it’s not just that sort of reform that will come, but also, we’re looking to close the loopholes here where people are subverting the Act. Some of the companies are doing this. And they’ll be written to shortly to ensure greater compliance.
“Because our job is to ensure that Guyanese can progress. When they get a local content certificate, they also have to submit a plan to show how they’re going to (increase Guyanese representation in) their management,” he pointed out.
According to the Vice President, the Government’s ultimate aim is to not only get Guyanese as workers, but also to get them into management. As such, Jagdeo outlined the Government’s zero tolerance for companies bypassing the Local Content Act. Jagdeo even noted cases where foreigners were being paid more than the locals, all of which, according to him, would be addressed by the Government.
“We’ve seen cases where, for comparable skills, they’re paying the foreigner much more than the local person. And this is happening with the bigger companies. I’m not talking about the small Guyanese local content certificate holders. Some of the bigger ones who supply large amounts in terms of volume and value of contract, to Exxon.
“We’re watching all of these things carefully. We have to look out for our people. And some of these companies benefit from huge help from the Government. And then they want to shaft Guyanese too. It will not be tolerated.”
The Local Content Act states that contractors, sub-contractors, and licensees operating in Guyana’s petroleum sector must submit a Local Content Annual Plan, outlining in detail their procurement, employment, and capacity development plans for the reporting year.
For the companies who fall afoul of this act and fail to meet the minimum targets of the legislation, there are fines that range from as low as $5 million to as high as $50 million. (G3)