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Lloyds List: Venezuela hands $11.2bn tax bill to US oil majors

By: Rainbow Nelson, Lloyds List
Published: Nov 16, 2006

Two US oil firms have been handed multi-billion dollar tax bills by the Venezuelan tax authority.

ConocoPhillips and ChevronTexaco have between them been told to pay outstanding tax liabilities of $11.2bn for their operations in the Orinoco heavy crude belt.

Venezuelan tax body the Seniat has been reviewing the tax liabilities of foreign oil companies in the country, resulting in previous standoffs with international operators including, Total and Shell.

ConocoPhillips has been told it owes $7.2bn, while ChevronTexaco has been handed a $4bn charge.

The tax agency said that auditors reviewing income tax payments for 2002 and 2003 objected to ‘excessive’ salaries for foreign workers and undue write-downs for investment and for previous years’ losses.

Both companies have 15 days to pay the full amount.

Reforms to the royalties the government receives from oil companies is to lift tax revenue from the oil industry to Bls48trn ($22.4bn), or 45% of government income in 2007, compared to Bls40.7trn in 2005.

The income tax rate on four heavy crude upgrading projects in the Orinoco area rises to 50% from 34% on January 1, while royalties on oil projects have reached 33.3%, up from as low as 1% on certain projects in 2004.

Chevron and ConocoPhillips are both partners with state oil company PDVSA in the Ameriven, one of four such projects that converts tar-like crude into lighter synthetic oil.

Conoco is also a 50.1% partner with PDVSA in Petrozuata heavy crude project.

Increased taxation has fuelled government spending on social projects and infrastructure investment such as the Orinoquia Bridge, opened on Monday by Venezuelan and Brazilian presidents Hugo Chavez and Luis Inacio Lula da Silva.

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