The Mozambican Public Integrity Centre (CIP) yesterday condemned the lack of transparency in the method the Mozambican tax authorities used to calculate the tax that Eni is to pay on its recent share transaction with Exxon.
“In the public presentation of the value of the capital gains tax that will be applied on Eni East Africa, the Tax Authority did not explain why it chose a formula different from that used in previous transactions, that is, there are no details on how the Tax Authority (TA) came to the decision that this was the best formula to use,” the CIP economists write.
In a note on the calculation of the tax that Eni East Africa is expected to pay for the sale of 25 percent of its stake in area 4 of the Rovuma Basin to the American multinational Exxon Mobil entitled ‘There is no transparency in the calculation of the value of capital gains’, the CIP notes that in its statement, the AT says that “in order to reach the value [of US$350 million in taxes] [it] resorted to the information made available and provided by Eni, without specifying which [information]”.
“Government dependence on company information is problematic, since there may be an intentional or unintentional omission in the declaration, affecting the process of tax assessment,” the CIP remarks.
Economists use an opinion from the Administrative Court on the accounts for 2014 and 2015 to argue that the judges draw attention to “the fact that companies are not playing their role as they should, which could allow multinationals to claim recovery of costs that are not recoverable under the terms of the country’s tax law”.
“All things considered, it should be noted that the key to calculating the capital gains to be imposed on Eni is the costs that are not disclosed and there are concerns about their reliability, since, as the Tax Authority states in its opinion on the state’s General Account of 2015, they are not adequately monitored by the competent entities, in this case, the National Petroleum Institute and the TA,” the CIP points out.
Good governance, the monitoring group concludes, “begins with transparent and unequivocal laws, making it impossible for them to be applied in different ways and at the pleasure of those who apply them”.
The CIP is a non-governmental organization whose purpose is to promote integrity, transparency, ethics, good governance and human rights in Mozambique.
Last week, the Mozambican Tax Authority announced that the government would receive about US$350 million in taxes for the acquisition of 25 percent of Eni East Africa by US nrgy company Exxon Mobil.
According to Aníbal Balango, the payment will only be made when the financial transaction is completed, probably in about six months.
As a non-resident company, Eni is eligible to pay a tax on half the value of the transaction, the total value of which was announced as US$2.8 billion. That figure was later reduced by additional US$1.1 billion due to Eni investments currently underway in the country, which means a rate of 32 percent, explained the spokesman of the Mozambican tax authorities.
The proceeds from the deal, announced earlier this month, should not help the Mozambican government to deal with the debt crisis it is experiencing, and which forced it to default on yet another payment, this time from Proindicus, worth almost US$120 million last Tuesday.
US oil giant Exxon announced on Wednesday of lat week that it would buy 25 percent of Italy’s Eni stake in the US$2.8 billion Coral project in Mozambique, where Portugal’s Galp has a 10 percent share.
Eni will continue to lead the Coral liquefied natural gas project and all operations in Area 4, while Exxon will lead the construction and operation of the onshore gas liquefaction plant, according to the company.
The projects in Area 4 are 70 percent owned by Eni East Africa, by the local regulator, the National Hydrocarbons Company of Mozambique, and the Korean company Kogas and Portuguese company Galp each having 10 percent.
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