Argentina Encourages Greater Oil Output With New Tax Breaks

by Mike Godfrey, Tax-News.com, Washington

13 November 2008

In a move aimed at boosting the country's flagging oil industry, the Argentinean government has announced that it is set to introduce a number of tax incentives for energy companies.

The initiative, dubbed the "petroleo plus" plan, has been devised to try and combat the country's flagging oil production over recent months by offering those energy companies directly involved in the production of oil a number of tax concessions.

Under the scheme, energy firms will be encouraged to increase their oil investments in return for tax breaks on a number of business-related costs - for example the export duties imposed on oil shipments. A condition of the regime is that energy companies will be expected to increase their oil exploration activities.

Not all companies will be eligible for the scheme, however; only those firms who surpass 2008's production level estimates will qualify. For those that do make it through, tax credits will be awarded according to how much their investment in the industry increases.

The government has estimated that the measure will have immediate fiscal benefits for the country by generating around USD8.6bn worth of extra investment in the energy sector, with long-term economic stability also set to rise through the extra jobs the scheme will create.

According to the country's President, Cristina Fernandez, any losses incurred by the introduction of the tax will be covered by the additional revenue achieved by the energy firms.

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