By
STCIC
The
Trinidad Guardian
Port
Spain
Petroleumworld.com
03 19 06
We
wish to draw your attention to an article published in the March
9 Business Guardian, headlined “T&T gas tax regime
extremely low” by Luis Araujo.
The article
was based on an IMF working paper, “Trinidad and Tobago:
The Energy Boom and Proposals for a Sustainable Fiscal Policy”
by Delia Velculescu and Saqib Rizavi which was published in
October, 2005.
The caption
of this article is misleading in its reference to T&T’s
gas tax regime as being low.
What the
IMF paper, on which this article was based, actually said was
that the royalty rate for natural gas was low and not natural
gas taxes.
The actual
quotation from the IMF paper is reproduced below for reference.
“The
Government, for some time, has been considering a reform of
its energy tax regime, in particular pertaining to the gas sector.
The main impetus for this move has been the realisation that
the royalty rate for gas production in Trinidad and Tobago is
extremely low by international standards.” —IMF
Working Paper, Velculescu and Rizavi.
There is
a fundamental difference between a royalty and a tax.
A tax is
a fee charged by a government on a product, income, or activity
and is a function of the level income and profit.
In the case
of oil, for example, this equates to Supplementary Petroleum
Tax (SPT) and Petroleum Profits Tax (PPT). A royalty, on the
other hand, is payment made for the use of property, such as
a patent, copyrighted work, or as is the case with natural gas,
a natural resource.
Natural
gas production is subject to the following:
Petroleum
Profits Tax (50 per cent)
Unemployment
Levy (5 per cent)
Green Fund
Levy (0.1 per cent on Gross Revenue)
Gas Royalty
(rate variable and dependent on contract)
Natural
gas is also produced under production sharing contracts which
are governed by the terms of the specific contract.
Studies
by international oil and gas consultancies also show that T&T’s
fiscal regime for oil and gas is among the harshest in the world.
A presentation
by Wood McKenzie at the recent 2006 T&T Petroleum Conference
shows where T&T stands in terms of the percentage of government
take as compared to other oil and gas provinces with respect
to deep water oil exploration and production.
A similar
point of view was expressed by PWC at the 2005 T&T Petroleum
Conference when they noted that the Government’s take
was approximately 80 per cent for oil and 60 per cent for gas
which was above the global average.
The headline
of this article can lead to misperceptions with respect to the
energy sector. In this regard we thought that we would simply
point out the facts as they stand.
South Trinidad
Chamber of Industry and Commerce
