One en­er­gy ex­pert be­lieves that more de­tails on the pro­posed leg­is­la­tion geared to in­crease the amount of US dol­lars paid to the Gov­ern­ment by en­er­gy sec­tor com­pa­nies needs to be pro­vid­ed.

In an in­ter­view with the Sun­day Busi­ness Guardian, for­mer min­is­ter of en­er­gy in the 2010 to 2015 ad­min­is­tra­tion, Car­olyn Seep­er­sad-Bachan, said at this stage the leg­is­la­tion is still un­clear and there is a need for more de­tails on the in­di­vid­ual mea­sures in­clud­ing en­force­ment mea­sures.

There­fore, Seep­er­sad-Bachan said it is as­sumed that there would be ex­ten­sive stake­hold­er con­sul­ta­tions in­clud­ing with the tar­get­ted en­er­gy com­pa­nies.

The pro­pos­al was first dis­closed by Min­is­ter of Fi­nance, Colm Im­bert on Mon­day dur­ing the 2025 bud­get pre­sen­ta­tion.

Last Tues­day dur­ing a pan­el dis­cus­sion at the T&T Man­u­fac­tur­ers As­so­ci­a­tion’s (TTMA) Post Bud­get Dis­cus­sion at the Hy­att Re­gency in Port-of-Spain, Im­bert ex­plained that the coun­try was cur­rent­ly miss­ing out on ap­prox­i­mate­ly US$2 bil­lion an­nu­al­ly from en­er­gy com­pa­nies. Dur­ing the bud­get, Im­bert said by 2025 he would in­tro­duce leg­is­la­tion to en­cour­age en­er­gy sec­tor com­pa­nies to pay all their tax­es in US dol­lars, giv­en that all of their prod­ucts are ex­port­ed.

“I made a state­ment in the bud­get, and I want to ex­plain why I did it. We earn about $28 bil­lion in a good year from the en­er­gy sec­tor in T&T. We are sup­posed to get about $28 bil­lion in terms of en­er­gy tax­a­tion. Now, if you do the math, that’s about US$4 bil­lion more or less but the amount that we re­ceive is on­ly US$2 bil­lion. So, there’s a miss­ing two bil­lion some­where,” said Im­bert.

“So what the en­er­gy com­pa­nies are do­ing is they’re con­vert­ing the US out­side of the gov­ern­ment sys­tem. That doesn’t make any sense, be­cause if you’re a pro­duc­er of oil or a pro­duc­er of petro­chem­i­cals, all your prod­ucts are ex­port­ed, and all of them are go­ing to gen­er­ate for­eign ex­change in terms of rev­enue for the com­pa­ny,” he de­tailed.

She not­ed that the Min­is­ter ex­plained in his bud­get pre­sen­ta­tion how the im­me­di­ate re­demp­tion of VAT bonds in the do­mes­tic mar­ket by the en­er­gy sec­tor com­pa­nies neg­a­tive­ly im­pact­ed the avail­abil­i­ty of for­eign ex­change.    

“In an at­tempt to set­tle out­stand­ing VAT re­funds due to en­er­gy com­pa­nies, it is clear that the Gov­ern­ment did not an­tic­i­pate that the pro­ceeds de­rived from the re­demp­tion of these bonds in TT$ would in turn be used by these com­pa­nies to set­tle tax­es owed to the Gov­ern­ment.  How­ev­er, it is im­por­tant to be re­mind­ed that this may be a one-off trans­ac­tion and not like­ly to re­cur,” Seep­er­sad-Bachan dis­closed.

She in­di­cat­ed that it is al­so im­por­tant to note that T&T has been deemed a des­ti­na­tion favourable to for­eign di­rect in­vest­ment with spe­cif­ic ref­er­ence to the en­er­gy sec­tor.  

“Amongst oth­er fac­tors, a fac­tor con­sid­ered as favourable to for­eign in­vestors in the sec­tor is the ease of repa­tri­a­tion of prof­its to sup­port the pay­ment of div­i­dends to share­hold­ers.    

“In this re­gard, it is hoped that the Gov­ern­ment con­tin­ues, in a sim­i­lar vein to pre­vi­ous gov­ern­ments, to pro­ceed as much as pos­si­ble on the path of in­cen­tivi­sa­tion as op­posed to co­er­cion and to ful­ly ex­plore the pos­si­ble and avail­able pol­i­cy tools and mech­a­nisms.  As we take steps to im­prove the avail­abil­i­ty of for­eign ex­change, it is im­por­tant to en­sure that we chan­nel this de­plet­ing and scarce re­source in­to the growth and de­vel­op­ment of T&T,” Seep­er­sad Bachan added.

Com­ment­ing on the pro­posed leg­is­la­tion, en­er­gy ex­pert Gre­go­ry McGuire said cur­rent­ly the up­stream pro­duc­ers pay most of their tax li­a­bil­i­ties in US dol­lars. He said that this is the main source of US dol­lars go­ing di­rect­ly to the Gov­ern­ment – through the Cen­tral Bank.

What this pro­vi­sion will do is bring the down­stream com­pa­nies in­to the fold, ex­plained McGuire, who is chair­man of the T&T Ex­trac­tive In­dus­tries Trans­paren­cy Ini­tia­tive

“This will be a sig­nif­i­cant de­vel­op­ment as it may in­volve the petro­chem­i­cal com­pa­nies, LNG and NGC. The joint forex pay­ments from these com­pa­nies can amount to over us$200 mil­lion de­pend­ing on mar­ket con­di­tions and prices. Re­call that dur­ing the peak of the Ukraine – Rus­sia con­flict, am­mo­nia prices soared to over US$1,600 per tonne com­pared to long-term nor­mal of around US$250.00 per tonne,” he men­tioned.

Speak­ing on the petro­chem­i­cal sec­tor, McGuire said it is made up of large in­ter­na­tion­al com­pa­nies, all of whom have been in the busi­ness for decades- with the one ex­cep­tion, Caribbean Gas Chem­i­cals Lim­it­ed (CG­CL) in La Brea.  

He not­ed that based on TTEITI da­ta, the petro­chem­i­cal com­pa­nies cur­rent­ly meet their tax oblig­a­tions in TT dol­lars.  

“I think the main im­pli­ca­tion for these com­pa­nies is that they will have to make some ad­just­ments to their cash flow plan­ning.”

The In­ter­na­tion­al Tax­a­tion Strat­e­gy Ad­vances doc­u­ment of the Min­istry of Fi­nance out­lines that this coun­try’s tax en­vi­ron­ment faces unique chal­lenges:  

• The coun­try’s sig­nif­i­cant re­liance on the en­er­gy sec­tor is ev­i­denced in our  Gross Do­mes­tic Prod­uct (GDP), cou­pled with the pres­ence of nu­mer­ous multi­na­tion­al cor­po­ra­tions, high­light­ing the need for tax cer­tain­ty and fair rev­enue col­lec­tion.

 • How­ev­er, cur­rent leg­is­la­tion and case law do not pro­vide suf­fi­cient clar­i­ty on crit­i­cal is­sues, par­tic­u­lar­ly those re­lat­ed to trans­fer pric­ing.

 • Trans­fer pric­ing method used by multi­na­tion­al com­pa­nies to al­lo­cate prof­its and ex­pens­es among their var­i­ous sub­sidiaries--re­mains a con­tentious area with on­go­ing dis­putes and un­cer­tain­ty.

Look­ing at Base Ero­sion Prof­it Shift­ing (BEPS) In­clu­sive Frame­work (Coun­try-by-Coun­try) Re­port­ing Coun­try-by-coun­try.

The doc­u­ment iden­ti­fied that re­port­ing is a mech­a­nism used to com­pile and dis­close fi­nan­cial in­for­ma­tion for multi­na­tion­al groups with con­sol­i­dat­ed rev­enues ex­ceed­ing the equiv­a­lent of US$850 mil­lion (ap­prox­i­mate­ly $5.76 bil­lion).  

“For ex­am­ple, if John Doe Group Lim­it­ed, which op­er­ates 20 com­pa­nies glob­al­ly, has to­tal rev­enues sur­pass­ing $5.76 bil­lion, it is re­quired to sub­mit this fi­nan­cial da­ta to the tax ad­min­is­tra­tion (BIR) in Coun­try A.

“This re­port­ing must fol­low a spe­cif­ic for­mat as de­tailed in the leg­is­la­tion, en­abling the BIR to de­tect po­ten­tial tax avoid­ance strate­gies and en­sure that prof­its are taxed in the ju­ris­dic­tions where the eco­nom­ic ac­tiv­i­ties oc­cur,” the doc­u­ment out­lined.

It not­ed that the Coun­try-by-Coun­try) re­port­ing will pro­vide the Board of In­land Rev­enue with a glob­al pic­ture of the op­er­a­tions of multi­na­tion­al cor­po­ra­tions.

The Board of In­land Rev­enue can use this in­for­ma­tion to con­duct high-lev­el trans­fer pric­ing risk as­sess­ments and eval­u­ate oth­er BEPS-re­lat­ed risks.  

“In ad­di­tion, un­der BEPS Ac­tion 13, all MNEs over EUR750 mil­lion are re­quired to pre­pare a CbCR with ag­gre­gate da­ta on the glob­al al­lo­ca­tion of in­come, prof­it, tax­es paid, and eco­nom­ic ac­tiv­i­ty among tax ju­ris­dic­tions in which it op­er­ates,” the doc­u­ment added.