Venezuela May Expand Oil Industry Tax Audit Back To 1990s

by Mike Godfrey, Tax-News.com, Washington

06 January 2006

The Venezuelan tax authority has indicated that it is considering widening an audit of companies operating in 32 oil fields, possibly covering tax years stretching back as far as 1993 in an attempt to recover billions of dollars in unpaid taxes.

The tax agency Seniat is claiming that oil firms have been misinterpreting the nation's corporate tax laws since the early 1990s when the country's oil fields were opened up to private investment and paying tax at a rate of 34% instead of the 50% rate demanded from firms operating in the oil industry.

Under the previous business-friendly administration, Venezuela offered tax incentives to oil firms in order to encourage investment at a period when oil prices were relatively low. However, the government of President Hugo Chavez has begun to roll back these liberal policies and force foreign companies into joint ventures with the nationalised Petroleos de Venezuela.

Tax agency head Jose Vielma Mora told Dow jones Newswires that Seniat's technical team for the mining and oil division will meet from January 30 to February 3 where they will decide whether to expand the audit.

Seniat has already assessed 22 companies for under payment of taxes between the years 2001 to 2004, billing them a total of $891 million in back tax. According to Vielma Mora, the tax claims have been largely accepted by the companies concerned, some of which have begun to make repayments.

Dow Jones reported that Chevron Corp, BP Plc, Hocol and OPEN are the latest firms to have been notified of claims for back taxes.

Seniat is also auditing four foreign mining companies, including US-based Hecla Mining Co. The other firms are said to be based in Canada, Israel and India.

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