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Daily Telegraph: BP and Shell join oil majors facing Senate tax check

BP and Shell join oil majors facing Senate tax check
By David Litterick in New York  (Filed: 28/04/2006)

BP and Shell are about to be dragged into the latest row over high petrol prices after a US Senate committee demanded to see tax returns from the 15 largest oil companies as part of an inquiry into industry profits and soaring prices.

“I want to make sure the oil companies aren't taking a speedpass by the tax man,” said Senator Charles Grassley, chairman of the Senate finance committee, meaning that they were not dodging their taxes, as he asked the Internal Revenue Service to hand over records for the past five years.

The recent surge in oil prices has pushed up pump prices and delivered multi-billion dollar profits to the oil majors. President Bush, usually a fierce advocate of the oil industry, described high petrol prices as a “hidden tax on the working people”. He has stopped filling the US strategic reserve in an attempt to get more oil on the open market.

BP, which blames high prices on speculators and hedge fund managers, said it had nothing to hide. “As far as our taxes are concerned, everything is transparent and above board.” A spokesman said the company was trying to educate the public “to make people understand how the market works and why prices are where they are”.

But Senator Grassley, a long-time critic of big oil who has balked at the high salaries and pensions earned by executives, said: “We all know there can be a slip between cup and lip on corporate profits made and taxes paid.” He also berated former ExxonMobil boss Lee Raymond for his $400m (£220m) compensation package which he said “may have been subsidised in part by the taxpayers”.

The Senate's request is highly unusual. The last time it asked to see tax records was in 2001 when looking into the collapse of Enron.

However Senator Max Baucus said: “It's relevant to know what the real financial picture is for this industry.”

Many politicians are considering measures that would see oil companies stripped of $2bn in tax breaks, created when Washington wanted to encourage exploration in the Gulf of Mexico. Also being discussed is a provision to change accounting rules for oil inventories that would force the five biggest – ExxonMobil, BP, Shell, Chevron and ConocoPhillips – to pay $4.8bn more in taxes over the next five years.

Red Cavaney, president of the American Petroleum Institute, slated the proposed changes as “equivalent to a windfall profits tax”. BP results showed it paid over $7bn in overseas taxes, while Exxon paid $8bn in total.

The inquiry came as rising oil and gas prices pushed ExxonMobil's profits to a record $8.4bn in the first quarter, prompting a Texas judge to call for a boycott of the company's filling stations. Exxon says it has invested more money over the past 15 years than it has earned.

Critics of the Senate said it was unlikely to uncover any wrongdoing and that politicians were grandstanding in an attempt to be seen to be acting ahead of important mid-term US elections this year.

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