Lagos — The federal government has reduced tax rates in the currently reviewed Petroleum Industry Bill, PIB.
This was revealed by Mr. Pedro Omontuemhen, an Accountant consultant with PricewaterCooperHouse in his presentation on ‘Structuring the Petroleum Industry Bill for Long Term Oil and Gas Industry Competitiveness in Nigeria’ at the Pre-conference workshop of Nigeria Association of Petroleum Explorationists, NAPE, on Monday.
According to him, the Bill which had been in the discourse for 20 years will now have a total of 72.5% (30% Company Income Tax, CIT, and 42.5 national hydrocarbon taxes) as against 85%/65.7% onshore and shallow waters tax rate.
He explained that there will be no more Petroleum Profit Tax, PPT, however; there will be a re-emergence of the hydrocarbon tax at a rate lower t than the PPT.
“Oil companies will now be liable to the CIT,” he said, adding that there will now be an increased in royalty rates.
“No more zero royalty rate for areas beyond 1000 meters depth. Royalty rate will now be based on production terrain by price. As the price grows, royalty also grows,” he said.
He also said the Investment Tax Allowance will be repealed, alongside the Petroleum Investment Allowance, PIA, and be replaced with production allowance at a lower rate of $2.50 per barrel of fiscal oil price of Grandfather contract.
Grandfather contracts are already existing contracts.
“But for new production, production allowance will be $8 per barrel and 20 percent of the fiscal oil price,” he said.
He added that investments in the sector had dropped 18 percent year-on-year to the tune of $30 billion due to delay in passage of the PIB.
“The tax rate in Nigeria is really high. At a point, even the royalty rate was higher. The major driver was the PIB is that government wants to increase its take. So if you look at all the funds set up, royalties, taxes versus what we currently have, I think the total government take in the new PIB may be higher than we currently have. That is something new need to engage with government to make sure players won’t be discouraged,” he said.
“There’s need for a clear regulatory framework,” he added.
The Minister of State for Petroleum Resources, Timipre Sylva has said the current PIB will be passed into law by March 2021.
Global oil and gas market has been facing investment challenges as shares underperform with the emergence of the COVID19 pandemic since the beginning of the year.
As a result, there is now a shift from oil and gas companies to technology companies- Apple shares have since outperformed those of ExxonMobil. Likewise, interconnectivity platform, Zoom shares have also outperformed those of Saudi Aramco, Chevron, and other top oil and gas firms.
The 38th Annual International Conference & Exhibition, AICE is holding in Lagos from 15th-19th November 2020.
Vice President, Yemi Osinbajo will be the special guest of honour at this year’s conference in this year’s conference themed “Accelerating Growth in Nigeria’s Hydrocarbon Reserves: Emerging Concepts, Challenges and Opportunities”.