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January 9, 2015

Pakistan asks US to recover $24 million unpaid taxes


January 9, 2015

KARACHI: Pakistan has sought the US help in recovering Rs2.5 billion (around $24.8 million) in outstanding taxes from its major oil company, which left the country almost five years back without discharging its liabilities, official sources said on Thursday.
The Federal Board of Revenue (FBR), in a letter to the Inland Revenue of the United States, asked the department to recover the unpaid amount from New York Stock Exchange-listed oil giant Occidental Petroleum Corporation, the sources said.
They said the FBR invoked the provisions of avoidance of double taxation treaty signed between Pakistan and the United States for the recovery.
Occidental Petroleum Corporation was operating two subsidiaries Occidental Oil and Gas Pakistan and Occidental Petroleum (Pakistan) LLC in Pakistan.
On January 2007, however, the company sold its working interest to BP Pakistan Exploration and Production Inc. Interestingly, BP Pakistan divested its assets to United Energy Group of Hong Kong.
Occidental Petroleum had left Pakistan after two years of selling its working interest despite the fact that the local tax authorities didn’t provide the company with a no objection certificate for its clearance.
The tax authorities had been pursuing the case since May 2010.
In 2013, Large Taxpayers Unit Karachi attached the bank accounts of the company in local banks to regain its unpaid taxes for the years 2005, 2006, 2008 and 2010. And, the LTU managed to clinch only Rs22,000 by freezing the accounts.
In December last year, the FBR revisited the case and finalised the tax demand of Rs504 million against Occidental Oil and Gas Pakistan LLC and another Rs1.88 billion against Occidental Petroleum (Pakistan) LLC.
The company’s branch office had been operational in Islamabad till 2010, a senior FBR official said. The company was sent several notices. “Every time, it repeated its claims of discharging the tax demand as per a memorandum of understanding (MoU) signed

between the FBR and Pakistan Petroleum Exploration and Production Companies Association (PPEPCA),” the official said.
A tax auditor, who undertook the scrutiny of financial accounts of Occidental Petroleum in 2007, said the company had paid the amount against gains on sales. However, the FBR received it after two years through a chartered accountant firm. According to the auditor, tax demands for miscellaneous years were still unpaid. The auditor further said the MoU was drafted but not signed; therefore it had no legal effect.
In an official memo sent to the FBR last month, the LTU Karachi said the PPEPCA had denied the signing of the agreement.
However, the points raised in the MoU made part of the Income Tax Ordinance, 2001 and Income Tax Rules, 2002 through amendments introduced in June 2012.
According to the tax department, there was no such stay order to restrict the tax authorities from recovery.
The recent letter to the US tax department was sent on recommendation of LTU Karachi.
The FBR, through the letter, sought detailed information about responsible officers or officials of Occidental Oil and Gas Pakistan LLC and Occidental Petroleum (Pakistan) LLC.
The demand raised by the FBR against Occidental Petroleum is only a principal amount and it will factor in fine and penalties at the time of payment, the tax official said.

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