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Brazil mulls over pre-salt taxes

Brazilian officials drafting a reform of the oil sector will propose that President Luiz Inacio Lula da Silva create a federal tax on companies developing offshore oil reserves deep under the ocean floor, a local newspaper reported today.

Proceeds from the new tax would be used to fund federal government social spending, Reuters quoted newspaper O Estado de S. Paulo as writing, without saying how it obtained the information.

The levy would tax companies involved in searching for oil in the so-called sub-salt area, Estado said.

The area is believed to contain as much as 14 billion barrels of oil.

An announcement on the matter is likely to take place on 18 June, when the government is scheduled to host an event to unveil some of the changes to the oil regulatory framework.

Lula's government is seeking greater control over the sub-salt oil reserves discovered in 2007, which could put Brazil among the 10 largest crude producers in the world, according to analysts.

Changes to the current structure of royalties have so far been ruled out while there is broad consensus among officials to implement a production sharing model to tap the sub-salt reserves, Estado said.

Petrobras will be awarded guarantees to participate in all sub-salt projects alongside a state company that will be created to manage the reserves, Estado said.

Any changes to the oil sector rules have to be approved by Congress.

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