Caracas, Venezuela, September 7, 2006—Venezuela’s income tax authority pushed hard over the last two days in an effort to receive over $70 million in adjusted and back taxes owed by various oil companies to the Venezuelan state. Among those companies affected are the Texas based Harvest Natural Resources Inc., the China National Petroleum Corporation (CNPC), France’s Perenco de Venezuela, Norway’s Statoil, Teikoku Oil de Sanviguere, and PDVSA Sincor.
Harvest Natural Resources announced today that their Venezuelan subsidiary had received a final tax assessment from Venezuela’s tax authority, SENIAT, of approximately $56 million in un-paid back taxes from 2001- 2004.
Harvest Natural, which owns 80% of their Venezuelan subsidiary, Harvest Vinccler, announced that it was “disappointed” with the assessment, because it appears to be $13 million more than the price agreed Harvest had agreed to with SENIAT in July.
As a result of the SENIAT ruling Reuters reported yesterday that Harvest stock fell nearly 10% on the New York Stock Exchange.
So far, Harvest Natural Resources has paid $5.3 million towards the tax-debt, which was first assessed last year at nearly $100 million.
Harvest Natural President and Chief Executive James A. Edmiston said in a statement that they “will continue to pursue with the SENIAT, as best we can, resolution of all tax matters from 2001 to 2005."
In August, Harvest Vinccler signed a Memorandum of Understanding with the Venezuelan Petroleum Corporation to open up an additional three fields of production in their Petrodelta joint venture project, of which Harvest will have 40% ownership. According to their website, since 1992, Harvest has delivered 113 million barrels of oil and 64 billion cubic feet of gas to the Venezuelan state-oil company, PDVSA.
Under altered Venezuelan regulations for the oil industry, companies operating in Venezuela were ordered last year to shift contracts to joint ventures with the Venezuelan state. The settlement of back-taxes is necessary for the transition in to joint ventures.
Additional Back Taxes
On Wednesday, SENIAT additionally billed the CNPC subsidiary for $11 million in back income taxes, nearly $2 million for Perenco, and almost $700,000 for Statoil.
According to the AP, the back taxes come as a result of an adjustment on taxes paid by oil companies operating in Venezuela since the 1990s. According to SENIAT, since previous contracts broke the national tax code by offering discounted rates, the agency is charging the difference back to 2001.
Tax collection has increased under President Hugo Chavez and the recent push by SENIAT for the payment of back taxes is part of a program initiated in 2005. Americaeconomy reported today that more than $700 million has been received by the Venezuelan tax agency in back-taxes in the past year.
The National Assembly additionally voted in the end of August to increase income taxes to 50% on companies operating in the Venezuelan oil rich Orinoco Belt. Venezuela announced last month that it will be quantifying and certifying its extra-heavy crude reserves in the Belt, which could make Venezuela the country with the largest petroleum reserves in the world.