Nigerian Panel Wants Oil-Profits Tax Hiked To 85%

A story from the respected Punch of Nigeria Thursday says panelists at a House of Representatives Committee on Petroleum Resources say oil comopanies are exploiting the country's laws to avoid taxes, and should pay an 85 percent rate instead of the current 50 percent rate, and would also require them to refine at least a quarter of all production oil insde Nigeria.

Here is the relevant part of that article, the top piece in today's Business section:

`Amend petroleum laws to increase profit tax’
by Michael Faloseyi and Chiawo Nwankwo
Feb. 24, 2005

ABUJA -- The House of Representatives has accused oil production companies of exploiting existing regulatory laws to Nigeria’s disadvantage.

It said the planned review of the Petroleum Act and the Deep Offshore and Inland Basin Production Sharing Contract Act, was therefore, to increase the petroleum profit tax from 50 per cent to 85 per cent and redress the trend.

The review of the laws is aimed at increasing the Federal Government’s share of the revenues from the sales of crude oil and operations of the crude oil exploration and production firms in Nigeria.

Chairman of the House Committee on Petroleum Resources, Dr. Cairo Ojougboh, who spoke atthe opening session of the public hearing on the review of the Acts held in Abuja on Tuesday, accused crude oil production companies in Nigeria of exploiting the existing laws to the detriment of the government.

Ojougboh said, “The oil and gas industry has been experiencing some difficulties in achieving the objectives of government with respect to revenue mobilisation and collection.

“Apparent difficulties found in the Petroleum Act and in the Deep Offshore and Inland Basin Production Sharing regimes are threatening to reduce the revenue available to government.”

“It is in line with these apparent distortions in the operations of the industry arising from defects in the Acts that the House of Representatives mandated the committee to investigate activities of oil companies’ operations in the upstream sector of the oil and gas industry.”

Ojougboh, however, said that the Federal Government would have to complement the planned review of the Act with investment in the infrastructure.

Giving an insight into the planned review of the petroleum laws, he said that the portion of the Petroleum Act that recommend 50 per cent petroleum profit tax would be amended to read 85 per cent.

The review would also compel oil companies to refine a minimum of 25 per cent of their total crude oil production locally as from April this year, to increase job opportunities in the country and ensure stable supply of petroleum products in the country.

It is unclear whether Nigeria can unilaterally increase taxes on oil companies doing business under the treaty that governs the Nigeria-Sao Tome and Principe Joint Development Zone and the accompanying Production Sharing Contracts that set tax and royalty rates, or whether the heightened cost of doing business in Nigeria would force foreign firms out of business there.