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Wednesday, 07 January, 2009, 22:20 GMT | more >>

Tax probe uncovers inconsistencies



By Upstream staff 

Industry experts have reported that several of the foreign oil projects in Venezuela being accused of tax evasion by the government were unprofitable and did not earn enough money to pay taxes.

President Hugo Chavez recently ordered the national tax authority Seniat to investigate firms operating 32 older fields for state energy firm PDVSA. He argued that many had not paid taxes since they took over the areas in the 1990's.

However, officials found that some of the fields did not contain the level of oil reserves firms expected when they bid for them, resulting in fewer profits and lower company earnings than anticipated. There were also frequent cases of poor infrastructure that needed improvement.

"When the companies took over the blocks, they found out in many cases the reserves that were supposed to be there were not really there, or that they were much less," said a company executive who asked not to be named. "Some companies had trouble maintaining or increasing output," the executive added.

International oil players including Chevron, BP and Total paid multi-million dollar bonuses to win the operating agreements in Venezuela.

"I think the companies had great hopes when they invested in the 1990s, but they have not seen the results they had hoped for," another analyst told Reuters.

Chavez has questioned how the companies could report loses in Venezuela while sending profits back to their headquarters abroad. .

Companies who cooperate with the tax probe will pay fines of up to 10% of what they owe in back taxes, while less cooperative firms could face penalties of 125%, according to Seniat officials.

"It looks as if there is not much we can do about it -- if we want to stay, we have to accept it," said the foreign oil company executive.

Thursday, 12 May, 2005, 21:42 GMT  | last updated: Thursday, 12 May, 2005, 21:47 GMT

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