Oil Transnationals in Venezuela Agree to Pay Back Taxes

Caracas, Venezuela, June 1, 2005—The majority of the 22 foreign oil companies working in Venezuela have decided to pay back billions of dollars in taxes they owe to the Venezuelan state.  José Vielma Mora, the President of Venezuela’s tax agency, Seniat, will meet with representatives of the transnational oil companies, as well as with the ambassadors of their home countries next Thursday, in order to establish payment methods. 

Seniat has been conducting an analysis of taxes and royalties since 2001, which the agency says foreign companies have evaded paying the Venezuelan state over the course of the past ten years.  This report, as well as a report detailing the debt that these transnationals are behind in paying, will be presented in a meeting with foreign oil companies and the Permanent Finance Commission in the Venezuelan National Assembly next Tuesday, prior to Thursday’s meeting. 

In October, 2004, Venezuela began to implement its new Hydrocarbons Law.  The law stipulates that all 32 service agreements that the 22 foreign oil companies made with PdVSA between 1992 and 1996 must be converted into joint ventures, thus limiting a transnational’s share in a venture to 49%.  It was also announced last month that royalties would be raised from 1% to 16% on any transnational operating, drilling or refining in the Orinoco Belt, where companies extract extra-heavy crude.

Last week Venezuela’s Minister of Energy and Petroleum, Rafael Ramírez, reported before the National Assembly that the opening of Venezuela’s oil sector to foreign companies amounted to “a true assault” on Venezuela’s petroleum industry.  Ramírez attributes the economic crisis of the last 15 years to the deals brokered between the national elites and the foreign companies.  The government estimates that 90% of the companies committed tax evasion and have accumulated a $3 billion debt in taxes and $1 billion debt in royalties. “Some of these companies have not paid taxes for years,” Ramírez reported, adding, “They are mocking our laws.  This is an unacceptable situation.  We can’t permit this.”

For example, the Sincor extra-heavy oil project surpassed its daily quota stipulated in their contract by 100,000 bpd. According to Ramírez, Sincor owes $1 billion in royalties.  “We are not too pleased with what they owe us; we need this money,” Ramírez stated.

However, Seniat data estimates the debt to be closer to 2 billion, probably because their evaluation only covers the past 10, as opposed to Ramírez’ figures that go back 15 years.

Thus far, the transnationals, with the notable exception of ExxonMobil, have not put up resistance, either to the increased taxes and royalties or to the allegations of tax evasion and corruption.

Royal Dutch/Shell Group Chief Executive Jeroen van der Veer affirmed last week that the company has no plans to reduce investment.  “We have not made a specific decision about recently-announced tax changes.  But of course our people over there will discuss that with the Venezuelan government,” he stated.