Luanda - Angola is imposing a consumption tax on petroleum companies that will raise some costs by as much as 10 percent, according to government documents.
The law requires companies to follow a tax schedule that adds 5 percent to most services and supplies and double that for equipment rentals, a presidential decree shows.
Angola set up a special tax reform branch in 2010 to work with government ministries on increasing revenue and closing loopholes in a bid to simplify taxation. The Opec member pumped about 1.74 million barrels a day from offshore fields last month, data show.
“Oil companies have benefited from tax exemptions even as government reforms have expanded the net of taxable services,” Emily Anderson, a researcher at the London School of Economics, said. “Closing loopholes in the fiscal system will bring greater tax justice and taxpayer confidence across all industries while making good economic sense.”
Companies spend about $20 billion (R197bn) a year in petroleum exploration and production in Angola, according to GlobalData and Oilfield Support Angola. Tapping fields under 1.6km of ocean and 4.83km below the seabed tests the limits of current technology. Mercer ranks Luanda as the most expensive city for expatriates with an oil-driven economy that has inflated prices.
BP, ConocoPhillips and Statoil were among oil explorers that would invest at least $3bn in wells off Angola next year, David Thomson, an analyst at Wood Mackenzie in Edinburgh, said in August. The companies would drill 20 wells at a cost of $150 million each.
The government’s tax reform branch planned to simplify and modernise codes while boosting revenue, Gilberto Luther, the director of the reform project, said in April.
By 2017 or soon after, a VAT on finished products and services would replace the consumption tax that was charged on each stage of manufacturing, Luther said. The new levy would cut the “cascading effect” of the current tax, which increases inflation by making prices higher than a lone tariff on the final product, he said.
Discussions were under way about whether to reduce the industry’s tax exemptions for raw materials and trim the current 90 days that oil companies were allowed to finish a customs declaration, Nicholas Neto, the head of the policy and procedures department at Angola’s National Customs Service, said in May. – Bloomberg