To Whom it May Concern:
I am asking the Ecuadorian press, and government to check very carefully and specifically to ask a lawyer expert in tax law in the United States to match carefully the SEC filings of Occidental (OXY) against the records of tax payments in Ecuador and other countries since Occidental claims to have paid between 28% to 43% taxes to other countries.
Every OXY investor and Yhe United States itself are being cheated, because IT IS A FACT that OXY never paid more than 12% of Taxes in Ecuador, and using tax schemes they paid less than 6% of taxes for exploration rights and explotation rights and as a matter of fact their claim against Ecuador is based of a claim to be refunded VAT taxes, claiming purchases of equipment and services that in many intances could never even prove were introduced in the country or bought in Ecuador.
OXY has never paid Corporate taxes in Ecuador, and I am sure is the same story in all countries where they operate.
Ecuador in other countries also should bring to the attention of the world the fact that while Oil companies operating in the United States pay between 12% to 22% of royalties to estates or to Federal Institutions in the United States besides the Corporate taxes, FICA, unemployment, estate taxes, etc that they pay in the United States. The treatment for the rest of the world is different and most oil companies do not pay ROYALTIES to those countries where they operate.
Now that the world has gone beyond the point of "OIL PEAK" those nations will suffer serious declines in oil production and may cease production in less than 15 years. The Unites States will only benefit if Oil Monopolies and Other International companies pay royalties and taxes to oil producing nations that need to prepare for those coming years when their economies must develop new industries or suffer horrible consequences and devastation to their economies.
Those countries could be able to provide added security, create better infrastructure and increase imports of American technology if they were to perceive royalties and better taxes. Instead of following sound economic policies The United States defends unfair practices, continues to feed corruption in the world by spending 3.5 trillion dollars in Intelligence agencies that operate clandestine operations ( http://www.feeds4all.com/Item.aspx?ItemID=14608096 ) specially in Ecuador (http://members.aol.com/bblum6/ecuador.htm)
Now monopolies such as Occidental manipulate the laws and use "International arbitration institutions" that are willing to dictate rulings that may violate sovereignty, the constitution of those countries , and the TAX laws of those countries.
In the case of Occidental I will find it interesting to find out how much they actually paid on Taxes to the countries where they operate such as Yemen, Oman, Qatar, Lybia, Colombia. I am sure most of those countries do not perceive ROYALTIES and the taxes paid by Occidental are not even close to what they have claimed before the SEC. A serious violation of the law.
I have sent a letter to the embassies of those countries and hopefully we can find out if Occidental has paid 28% to 43% to any of those countries. Otherwise they either should pay those countries the taxes they claimed they have paid them or they should pay the United States for all the taxes they are cheating or should pay the investors the money they are cheating claiming taxes that they do not pay. Because at least in Ecuador they never paid more than 12% because that is the law.
I will also like to find out if they pay any royalties to any of those countries. If that is not the case then Occidental has cheated either the Internal Revenue Service or has cheated taxes in those countries and their investors because their very own SEC filings declares such payments. I do not believe they pay any royalties to Ecuador and no corporate taxes were paid in Ecuador by occidental. http://sec.edgar-online.com/2006/03/01/0000797468-06-000031/Section7.asp
All the information can be found at the SEC site ( http://www.sec.gov/) I find several instances where Occidental declares payments for several years since the year 2000, between 28% and 43% taxes to "foreign countries and found out that in several countries they paid rather between 3% and 12% of taxes and no royalties whatsoever.
I believe there are discrepancies that should be analyzed carefully by lawyers and economist and several ministries in the countries involved. I have also asked the Ecuadorian Embassy in Washington to share information with countries such as Qatar, Yemen, Oman, Libya, Pakistan, Russia and Colombia to get to the bottom of the tax cheating schemes of Occidental when it declares before the SEC and the Internal Revenue Service certain figures and numbers that I know for a fact is not even close to the taxes paid to several countries. I have not been able to find any payments of Occidental in Ecuador as Corporate tax. I also quite confused because I have not been able to find reliable information and find out how much Occidental really paid Ecuador since they took over field 15 Shushufindi in 1999, and confirm if they even paid any taxes close to 12% for the exploitation of oil. Occidental also may have overcharged Ecuador for the use of the Ecuadorian transoleoducto which they had a percentage of ownership.
I have not been able to gather exact figures paid by Occidental and there are serious discrepancies between their earning posted in their website and the filings made before the SEC. I am certain that they have not paid the amount of taxes to other countries that it claims in its SEC filings which will mean Occidental is cheating the United States and the Internal Revenue Service and other countries. I would suggest that countries provide the true amount of taxes that Occidental paid to said countries otherwise Occidental would continue claiming they paid 28% to 43% to those nations. At least that much is declared in their SEC filing which I have highlighted below. If any of the countries where Occidental operates has received between 28% to 43% of taxes then I apologize to that nation and congratulate them.
I also believe Congressman Chuck Grassly (R-Iowa) who is proposing a bill against Ecuador should receive those facts from those countries since he is defending so adamantly a tax cheater as Occidental. have reviewed the record of Occidental as a Tax cheater for several years and it has settled several times for royalties and taxes that did not pay. cheating estates and indian reserves on royalties and I have bothered to send to the press here in the United States as well as in Ecuador a reminder of those instances.
I have attached two instances where it clearly shows OXY as a tax cheater. In the case with Ecuador, OXY claims to be entitled to a refund of VAT taxes which they claim to have incurred in the course of exploration and exploitation activities the firm made several purchases and incurred various expenses and paid VAT on a number of goods and services. Any business and company will incur expenses to purchase equipment and in fact upon reviewed of the SEC filings of OXY they claimed said taxes in their filings with the United States where the law allows them to deduct a small percentage of tax on those expenses. What should be known is that the majority of said VAT taxes were paid to other countries because Ecuador does not produce RIGS, Drilling Equipment and Oil exploration equipment, and yet Occidental wants Ecuador to refund them for any equipment bought even though it was not bought in Ecuador. I have visited the website of Occidental and I can not find anywhere a list of purchases made in Ecuador that will amount to ninety million dollars. I find appalling that such behavior could be ignored by the media.
Oxy has a very poor record paying their taxes and royalties and have cheated several times and paid settlements several times for not paying royalties. I have lived in Virginia and Texas for the last 26 years and have never heard that a company could ask for a refund for expenses incurred in other countries. Oxy argued before a British panel that they should be treated as any other consumer and in fact claimed "DICRIMINATORY PRACTICES" by Ecuador for not treating them as any other consumer although everybody knows that Occidental barely has bought anything in Ecuador. Yet it demands a refund on anything bought in other countries and introduced into Ecuador to exploit their resources. How can anyone get a refund of VAT taxes since those are the taxes that any consumer pays on the products they buy. To claim that they are exempt of paying the standard VAT tax is beyond absurdity. VAT is not included in the total tax rate that OXY paid to Ecuador, because it is a tax levied on consumers. It is absurd that Occidental would even claim that they are entitled to receive compensation as a consumer in Ecuador, and even more absurd that an International court in London will infringe against Ecuadorian law and demand that Ecuador pays a fine of 75 million dollars to Occidental beside the 90 million dollars that Occidental demands. In the United States if you buy something in Texas and pay VAT tax to Texas it will be beyond absurd to claim a refund of those VAT Taxes in Virginia. How can the United States then support the claim of OXY when OXY has cheated the United States itself several times.
While Oxy pumped 100,000 barrels daily for several years and made BILIONS of Dollars in Ecuador, and exploited billions of dollars from Ecuador they cheated on taxes and were tax delinquents besides other violations such as 40% of the field was farmed out to Encana without ever consulting Ecuador. In other words they were allowing another company to take oil from Ecuador without the company paying a cent to Ecuador. If that is not robbery and thievery what is. Is it Occidental above the law of the countries where they operate?. You can not defend the indefensible and I find disgusting that the Media do not bother to investigate and other countries ignore the practices of Occidental while they can be doing the same in those nations. As an American citizen I do understand that the United States simply will take the position of defending its companies when even experts in International law have voiced their concern and even criticized such treatment of Ecuador when it chose to even levy 75 million dollars for Ecuador's refusal to refund the VAT tax to Occidental.
The following is the statement of Occidental to the SEC, I am sure other countries were unaware that Occidental claims to have paid between 28% to 43% taxes to said countries.
Filing of Occidental before the SEC"
"Worldwide Effective Tax Rate
The following table sets forth the calculation of the worldwide effective taxrate for reported income from continuing operations and core earnings:
In millions 2005 2004 2003
REPORTED INCOMEOil and Gas (a) $ 6,293 $ 4,290 $ 3,213
Chemical 607 414 223
Corporate and Other 392 (390 ) (604 )
Pre-tax income 7,292 4,314 2,832
Income tax expenseFederal and State 671 946 673
Foreign (a) 1,349 762 558
Total 2,020 1,708 1,231
Income from continuing operations $ 5,272 $ 2,606 $ 1,601
Worldwide effective tax rate 28% 40% 43%
CORE INCOMEOil and Gas (a) $ 6,337 $ 4,290 $ 3,213
Chemical 777 414 223
Corporate and Other (405 ) (485 ) (543 )
Pre-tax income 6,709 4,219 2,893
Income tax expenseFederal and State 1,396 958 694
Foreign (a) 1,349 762 558
Total 2,745 1,720 1,252
Core income $ 3,964 $ 2,499 $ 1,641
Worldwide effective tax rate 41% 41% 43%
(a) Revenues and income tax expense include taxes owed by Occidental but paid bygovernmental entities on its behalf. Oil and gas pre-tax income includesrevenue amounts for the years ended December 31, 2005, 2004 and 2003, of $887million, $525 million and $397 million, respectively.
Occidental's 2005 worldwide effective tax rate was 28 percent for reportedincome and 41 percent for core income. The decrease in the United States incometax rate for reported income in 2005, compared to 2004, resulted from a $335million tax benefit due to the reversal of tax reserves no longer required asUnited States corporate returns for tax years 1998-2000 became closed due to thelapsing of statutes of limitations and a $619 million tax benefit resulting froma closing agreement with the IRS resolving certain foreign tax credit issues.The lower United States income tax rate in 2005 and 2004, compared to 2003,resulted from the crediting of foreign income taxes. Previously, Occidentaldeducted foreign income taxes in determining United States taxable income. An annual tax election permits a taxpayer to claim either a credit or a deductionfor foreign income taxes, whichever is more beneficial. Occidental expects to continue its election to credit foreign income taxes in future years.
That is what Occidental claims.
In regard to Ecuador this is what they have posted in their website
EcuadorOccidental operates Block 15 in Ecuador in which it holds a 60-percent economicinterest. Although Occidental holds legal title to 100 percent of the Block 15Participation Contract, it farmed out 40 percent of its economic interestrelated to Block 15 in 2000. Occidental's share of production averagedapproximately 42,000 barrels of oil per day in 2005. In addition, Occidental hasa 14-percent interest in the Oleoducto de Crudos Pesados Ltd. (OCP) oil exportpipeline.Development of existing fields, primarily Eden-Yuturi and the Indillana Complex,continued through 2005. Drilling and the installation of new wells nearly offsetthe natural decline of existing wells.Foreign oil companies, including Occidental, have been paying a Value Added Tax(VAT), generally calculated on the basis of 10 to 12 percent of expenditures forgoods and services used in the production of oil for export. Until 2001, oilcompanies, like other companies producing products for export, filed for andreceived reimbursement of VAT. In 2001, the Ecuador tax authority announced thatthe oil companies' VAT payments did not qualify for reimbursement. In 2002,Occidental initiated an international arbitration proceeding against theEcuadorian Government under the United States-Ecuador bilateral investmenttreaty based on Occidental's belief that the Ecuadorian Government isarbitrarily and discriminatorily refusing to refund the VAT to Occidental. InJuly 2004, a tribunal of international arbitrators awarded Occidentalcompensation for VAT refunds from Occidental's Block 15 operations that werewithheld by the Ecuadorian Government and indicated that similar VAT refundsshould be paid going forward. The Ecuadorian Government has appealed thetribunal's decision and the appeals proceedings continue at present. In theevent of an unfavorable outcome, the potential effect on Occidental's financialstatements would not be material.In September 2004, Occidental received formal notification that Petroecuador,the state oil company of Ecuador, was initiating proceedings to determine ifOccidental had violated either its Participation Contract for Block 15 or theEcuadorian Hydrocarbons Law and whether the alleged violations constitutegrounds for terminating the Participation Contract. Block 15 operationsrepresent approximately 7 percent of Occidental's 2005 consolidated production,4 percent of its proved consolidated reserves, and 2 percent of its totalproperty, plant and equipment (PP&E), net of accumulated depreciation, depletionand amortization (DD&A). In August 2005, Petroecuador issued a report
recommending that the Minister of Energy declare the termination of Occidental'sParticipation Contract for Block 15. The principal allegation stated in thenotice and the Petroecuador report is an assertion that Occidental should haveobtained government approval for the farmout agreement entered into in 2000. InNovember 2005, the Minister of Energy, following the procedure set forth in theEcuadorian Hydrocarbons Law, requested that Occidental respond to theallegations against it. In February 2006, Occidental submitted its response tothe Minister of Energy, in which Occidental confirmed its belief that it hascomplied with all material obligations under the Participation Contract andEcuadorian law, and that any termination of the contract based upon the statedallegations would be unfounded and would constitute an unlawful expropriation.Occidental has been cooperating with the Ecuadorian authorities in theseproceedings, and will continue to strive for an amicable resolution. Occidentalcurrently is unable to determine the outcome of these proceedings, but if therewere to be a negotiated settlement, it is probable that the terms wouldeffectively reduce the future profitability of Block 15 operations. See also"Off-Balance-Sheet Arrangements - Ecuador" for further information about the OCPpipeline.
BUT IN FACT OXY HAS A LONG HISTORY IN CHEATING TAXES AND ROYALTIES
UNITED STATES SETTLES WITH OIL COMPANIES
FOR UNDERPAYMENT OF ROYALTIES
WASHINGTON, D.C. - Devon Energy Production Company (formerly Pennzoil Company) has agreed to pay $11.9 million to resolve claims that Pennzoil underpaid royalties due for oil produced on Federal and Indian leases between January 1, 1988 and December 31, 1998, the Justice Department announced today. Sunoco, Inc. also agreed to pay $200,000 to resolve the same allegations that it underpaid royalties due the United States and Indian tribes.
"These settlements are an example of the Justice Department's determination to ensure that the government is compensated for underpayment of oil royalties," said David W. Ogden, Acting Assistant Attorney General for the Civil Division.
Federal leases are administered by the Minerals Management Service of the United States Department of the Interior. Each month, oil companies are required to report the amount of oil produced and the value of the oil produced on Federal and Indian leases. The companies pay royalties based upon the value of the oil they report.
The settlements resolve allegations that Pennzoil and Sunoco systematically underreported the value of oil they produced on Federal and Indian leases and, consequently, that they paid less royalties than they owed.
"The settlements brings us one step closer to restoring to the taxpayers and Indian tribes of the United States the money due for production of oil on public lands," said Mike Bradford, U.S. Attorney for the Eastern District of Texas. "We commend the companies for settling this matter in a way that avoids further litigation, and we will continue to press forward with the prosecution of this False Claims Act lawsuit against other companies that have underpaid their royalty obligations."
The settlement agreement with Pennzoil was signed by representatives of several Indian tribes, as well as the federal government and Pennzoil. Two relators who had filed a complaint in the United States District Court in Lufkin, Texas against Pennzoil and Sunoco on behalf of the United States under the underline">qui underline">tam provisions of the False Claims Act will share in the proceeds of the settlements.
The Department has also reached settlement agreements with several other oil companies -- Mobil Oil paid $45 million, Oxy USA, Inc. paid $7.3 million, Chevron paid $95 million, BP Amoco paid $32 million and Conoco paid $26 million.
The investigations and settlements were jointly handled by the Office of the United States Attorney for the Eastern District of Texas and the Civil Division of the Department of Justice, with the assistance of the Department of the Interior's Office of Inspector General and the Minerals Management Service.
Levin Wants to Close Stock Options Tax Deduction Gap WASHINGTON, Jun 05, 2007 (A. M. Best via COMTEX) -- It's a routine corporate practice: When reporting on stock options, companies report one set of figures to the Internal Revenue Service and another, often wildly different set to investors. It's legal, it's commonplace, and Sen. Carl Levin, D-Mich., wants it to end, arguing that it costs the country billions in lost tax revenue.
Levin, who twice before has filed bills seeking to close the so-called "book-tax" gap, chaired a hearing of the Permanent Subcommittee on Investigations in which he and other senators questioned executives from KB Home, Occidental Petroleum, and Safeway Inc. on the issue. Levin's conclusion: The "book-tax" disparity in how stock options are treated under the tax code and under Generally Accepted Accounting Principles "encourages" companies to issue them, he said, thereby widening the gulf between the pay of chief executive officers and average workers, which he sees as a problem.
"It is time to take a serious look at whether it makes sense to have two completely different sets of stock-option rules for financial accounting and tax purposes," Levin said. Levin is considering a bill that would limit such tax deductions to the amount reported as expenses, according to the committee, but he has not yet filed it. Levin filed similar legislation in 1997 and 2003, but it did not pass the Senate.
Under rules issued in 2005, companies who grant their executives stock options have to record an expense on their books equal to the fair value of the stock options on the day they were granted. Yet under the federal tax code, companies can legally claim a deduction for options based on the gains realized on the dates the options were exercised. If the price of a company's stock is higher on the date it was exercised than on the day the option was granted, the tax deduction may well be far higher than the amount recorded for the cost of the option as recorded in the company's finances.
"A company can take a small hit to profits, but a far larger tax deduction," Levin said, adding that such an arrangement may be "short-changing" the federal treasury.
According to newly available IRS data cited by Levin, U.S. corporations in 2005 took tax deductions that were $43 billion greater than the stock-option expenses on their financial statements. About 250 companies accounted for around 85% of that $43 billion, he said.
Los Angeles-based KB Home granted $11.5 million in options to executives while claiming tax deductions of $144 million, while Los Angeles-based Occidental Petroleum issued $29 million in options and deducted $353 million for them, and Pleasanton, Calif.-based Safeway issued $6.5 million in options and claimed deductions worth $39.4 million, according to the IRS data cited by Levin.
Some, such as the Washington, D.C.-based Tax Executives Institute, have questioned whether Levin's assertion that the gap is "short-changing" the treasury makes sense, as the deduction is offset by income taxes from the employee who exercises the stock option.
Levin also asked the executives their opinions on recent efforts to enact "say-on-pay" provisions via legislation. The House has passed a bill, one now in the hands of the Senate Banking Committee, that would require companies to permit shareholders to have nonbinding advisory votes on executive pay packages (BestWire, June 4, 2007).
William Tauscher, former chairman of the compensation panel for Safeway, said such a measure "could be good and bad." Good, he said, because it would increase corporate transparency, but bad because it would give voice to shareholders "with an agenda" who would show up to board meetings. Asked whether they oppose the bills, the executives were largely silent. KB Homes Chairman Stephen F. Bollenbach said his company "has no view regarding the matter" but that his company would "follow the law." Tauscher and John Chalsty, chairman of the compensation committee at Occidental Petroleum, also declined to say whether they opposed the measure.
(By Chris Grier, Washington correspondent, BestWeek: Chris.Grier@ambest.com)
Copyright (C) 2007 by A. M. Best Company, Inc.