What about energy tax regime?

Energy Minister Eric Williams appeared to be jubilant over his announcement a week ago of a significant natural gas find made by bpTT some 50 miles off the country’s East coast. Williams, who told media representatives that the “resource is in excess of two trillion cubic feet of gas plus condensate,” would throw in as a lagniappe that the long-term health of the country’s energy reserves was excellent. Most Trinidadians and Tobagonians are lay people and rather than Minister Williams merely giving out what the find represents in terms of volume he should have indicated what it represented at today’s prices, and how far Government has moved with respect to introducing a new oil and gas tax regime which would seek to ensure a “significant” increase in revenue for the country.

It is possible that bpTT will pay more taxes in foreign countries, for example, on the profits of sales arising out of this find, than it will pay here in royalties and other taxes, since only a relatively small portion of the net earnings it will enjoy on sales overseas, as is standard with other multi-nationals, will need to be repatriated to Trinidad and Tobago to take care of commitments. A sensible tax regime, although it will only partially redress the imbalance, nonetheless will make for a greater amount of money being paid out in royalties and allied taxes. Yet Government continues to stand still on a concern that should have been settled a long time ago. For while it was necessary to readjust taxes downward in the energy sector during the 1980s following on the dramatic slide in the price of oil, and again in the 1990s after the immediate post invasion of Iraq period, energy prices have been strong since the late 90s.

Recently, international crude prices, for example, soared past the US$50 a barrel mark. Almost inexplicably, however, the country’s oil revenue, according to Government, had been based on a fraction over US$32 a barrel for crude. Meanwhile, the Minister of Energy and Energy Industries should advise taxpayers the price Trinidad and Tobago is being paid for its natural gas in relation to international prices and seek to explain the difference. In turn, he should tell the country how soon Government will be in a position to finalise its work on the introduction of a new oil and gas tax regime. It is important that the term significant should not merely relate to oil and gas discoveries but to revenue as well, based on a realistic tax regime.