Thailand: Chevron may be forced to pay back taxes

Thailand: Chevron may be forced to pay back taxes

CHEVRON Thailand may be hit with a tax bill of close to Bt7 billion, said an
informed source at the Finance Ministry.

Finance Minister Apisak Tantivorawong has been asked by the Office of the
Auditor-General to collect back taxes from Chevron Thailand, a giant
producer of natural gas and crude oil.

The tax examination started when current Customs Department director-general
Kulit Sombatsiri questioned the previous customs and tax procedures relating
to oil transported to be used at oil rigs in the Gulf of Thailand, which
resulted in Chevron paying no tax for oil it transported to its offshore oil
rigs since 2001.

Kulit raised the point that oil sent by Chevron Thailand to its offshore
rigs should not be counted as exports. As a result of this new
interpretation of tax law, Chevron should have paid an excise tax, an Oil
Fund levy and 7 per cent value-added tax since 2001.

The Bt7-billion collection figure could include a tax surcharge and a fine,
the source said.

The source said the company might be spared the fine if it acted in good
faith after receiving advice on the matter from the Customs Department but
it might not be spared the tax surcharge of 1.5 per cent.

Thailand's sovereignty rights are at the heart of the issue, as there are
two schools of thought on this subject among customs officials.

Since 2001, oil transported by Chevron to its offshore rigs has been counted
as exports by the Customs Department, with customs officials referring to
Thailand's maritime claim stipulating that its territorial sovereignty does
not exceed 12 nautical miles. So oil transported farther than 12 nautical
miles from the coast must be counted as exports and benefit from a tax
exemption.

However, the Revenue Code and Petroleum Act extend Thailand's sovereignty
rights to cover 200 nautical miles of an exclusive economic zone and
continental shelf. So oil transported within the 200-mile radius should not
be counted as exports and as such should be subject to a tax payment.

Apisak is likely to agree with this argument, according to the source.

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com