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Friday, 05 December, 2008, 17:10 GMT | more >>

Ramirez confirms tax hike blow



By Upstream staff 

Venezuela will raise the tax rate on four multi-billion dollar oil upgrading ventures, in a new Bill to be presented to the National Assembly, according to Oil Minister Rafael Ramirez.

The plan to hike the oil tax rate from 34 to 50% on the foreign-controlled ventures comes on the heels of expansive reforms to foreign investment in the oil sector amid government accusations of tax evasion.

"In the existing law the Orinoco projects have an exception where they pay 34% but we are introducing a modification on income tax," Ramirez told Reuters after an Opec meeting in Vienna.

"We are going to re-establish what was there in the 1960s, which is a separate chapter on oil in income tax law that adjusts all oil tax rates into one rate without any reductions."

The tax increase would signal the latest move in a campaign by President Hugo Chavez to extract higher rent from contracts with foreign oil companies signed before he took office in 1999.

Chavez first unveiled the income tax increase in April, but tax authorities implied that the hike applied only to foreign oil production contracts and not to Orinoco.

Ramirez said the value of lost tax revenues amounted to $3.5 billion over the last 12 years.

The four Orinoco ventures, which cost about $9 billion to build, produce about 600,000 barrels a day by upgrading heavy Orinoco oil into synthetic crude.

Investors argued that they have to pay off loans on the projects before declaring profits, but Ramirez said this amounted to tax evasion.

"They paid $9 billion in investment in the first four years and decided how to prioritise their payments. They paid the banks first," he said, adding that the new law would specify who should be paid when.

"It was a mechanism of evading taxes. None of these companies have paid income tax," Ramirez added.

Ramirez also accused Total and ConocoPhillips of violating the terms of their agreements by pumping higher volumes than were allowed under the original terms approved by Congress.

The minister said the companies will be forced to pay a 30% royalty on the unapproved volumes retroactively, worth $1.5 billion.

He also criticised the operators for failing to fulfill commitments to use secondary recovery techniques in the heavy oilfields of the Orinoco. " The companies are producing with technology of 100 years ago," Ramirez said.


Wednesday, 15 June, 2005, 16:59 GMT  | last updated: Thursday, 16 June, 2005, 09:30 GMT

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