Tax and Extractives Study Reports Release
Oxfam Kenya is committed to addressing issues linked to extreme inequality and in promoting governance and accountability through providing in-depth evidence based research that influences policies and legislations that positively impact communities. Oxfam Kenya has released two reports on Tax and Extractives published 21st April 2016 titled; Potential Petroleum Revenues for the Government of Kenya: Implications of the Proposed 2015 Model Production Sharing Contract and Mapping Risks to Future Government Petroleum Revenues: A Framework for Prioritizing Advocacy, Research and Capacity Building.
With the Petroleum (Exploration, Development and Production) Bill, 2015 currently in Parliament, our reports shows that the Production sharing model proposed is a marked improvement from the 2008 model. The key differences are in the shift of the calculation of profits to the government, how corporate income tax is paid by the companies and the capping of interest on debt recoverable. The reports demonstrate that under-reporting of the oil sale price by just $2 per barrel could result in a loss of government revenue of around $1 billion over the lifespan of oil production. It also shows that inflating operating costs by 10% could cost the government $300 million. Tax base erosion, tax avoidance and evasion are also major risks to future government loss.
The reports put forward recommendations on ensuring Kenya’s petroleum fiscal regime is robust and caters to the interests of the country whilst still attracting investment to the sector. Other recommendations are; ensuring transparency and accountability of the Petroleum sector, a call for no new production sharing contracts to be entered into until the Petroleum Bill, 2015 is enacted, a push for cost recovery audits to be done and a review of tax and investment treaties on the use of tax havens and low tax jurisdictions.
We would appreciate any feedback/thoughts on the reports. We also welcome reporters to use the resources to highlight issues on the oil discovery in Kenya.