 |
| Left, TRA commissioner general, Alfayo Kidata at a press briefing. |
The EastAfrican has established that the Tanzania Revenue Authority (TRA) has issued instructions to BG Group’s bankers Citi to freeze their accounts.
TRA is demanding the sum from proceeds of the sale of BG’s 60 per cent stake to Royal Dutch Shell, Exxon Mobil, Ophir Energy and Statoil. The deal also included BG’s interests in gas blocks 1 and 4 in Southern Tanzania.
Sources in the Ministry of Finance and TRA said that a directive had been issued to freeze the BG Group accounts until the capital gains tax was paid. After the accounts were inspected, it was found that the money in the bank was only $5 million, about 1 per cent of what TRA is claiming.
The decision casts a shadow on the appeal BG Group has filed with the Tanzania tax tribunal disputing how the assessment was arrived at.
BG Group says it is unable to pay the tax because it had allocated $850 million of the total acquisition price to the Tanzania unit. BG Group further says its Tanzania subsidiary had already spent $1.5 billion, hence indicating a capital loss.
According to Tax Revenue Appeals Act (2006), any person who is aggrieved by a tax assessment may object in writing to the Commissioner General.
Section 12 (3) of the same law says “where a notice of objection to an assessment is given, the person objecting shall, pending the final determination of the objection to an assessment by the Commissioner General in accordance with section 13, pay the amount of tax that is not in dispute or one-third of the assessed tax, whichever amount is greater.”
Lawmakers and experts called for the government and BG Group to resolve the impasse which could delay the final investment decision on the $30 billion liquefied natural gas (LNG) plant which the latter plans to build in partnership with the Tanzania Petroleum Development Corporation (TPDC).
The construction of the 10 million-tonne-a-year LNG plant was initially expected to be complete around 2020. Under the country’s laws the construction cannot be approved until the tax is paid.
The government has maintained silence on the matter, but TRA Commissioner-General Alphayo Kidata said he hadn’t been briefed on the matter, while Minister for Energy and Minerals, Prof Sospeter Muhongo directed The EastAfrican to TPDC director-general Dr James Mataragio, who declined to comment.
There have been fears that the tax dispute could have a negative impact on foreign investors looking to invest in Tanzania.
Analysts believe Shell has through the BG stake strategically positioned itself to acquire exploration licences in Zanzibar now that it co-owns BG with the government. Shell has struggled for over 10 years to secure exploration licences on the Isles.
Subiro Mwapinga, a consultant at Mnazi Bay Consulting Group, an oil and gas consulting firm, said the current tax dispute has put the LNG investment in jeopardy and could potentially impact other projects such as the $10 billion Uganda-Tanga crude oil pipeline.
“If TRA’s tax calculations were conducted along all international best practices and in compliance with the laws, there is little that BG Group can do to avoid paying the tax but this has a big implications in terms of changing the structures of the LNG plant, which is planned to be built in partnership with all the players. The most likely scenario is for other players to build their individual LNG plants,” Mr Mwapinga said.
Sources within the ministry of Finance and the TRA said that the government had also decided to temporarily suspend Shell and BG Group’s application for renewal of exploration licenses in the two blocks until the dispute is resolved.
Exploration licences are given for periods of four years then renewed for four years and another period of three years, after which a company is expected to apply for a development licence.
Block 1 licensce expires in December this year, while the block 4 licence expires in October 2017.
By then, according to the government records, the company will have exceeded the minimum of 11 years and to apply for development licenses but it is not yet ready for that.
“The scenarios meant that Shell had to apply for an extension of the exploration license for block 1 and 4 but the extension is upon the discretion of the minister since it is beyond the 11 year period. That is where the government has an upper hand,” the sources said.
Innocent Bashungwa, an MP for Karagwe and former co-ordinator at the Tanzania Extractive Industries Transparency Initiative told The EastAfrican that the administration of oil and gas sector involves billions of dollar’s worth of investments and transactions between farm- ins and farm-outs.
“When big bucks change hands, disputes can arise if the legal and regulatory system in a host country is ambiguous about transactional procedures,” said Mr Bashungwa, adding that the dispute is the sign of poor legal and regulatory preparedness on the part of the government at the time of signing the production sharing agreement (PSA) with BG and other PSAs that were signed then.
“The dispute is unfortunate at this time of gas developments in the country, when the government is trying to show the world that we can be relied upon for long-term investments. I trust the government and BG will find an amicable solution for the capital gains transaction in dispute. Otherwise, the Oil and Gas Association of Tanzania members and prospective investors may take the issue as a harbinger of what to expect in the future,” the legislator said.
The East African
No comments:
Post a Comment