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INTERVIEW-Mexico aims to gradually cut Pemex tax burden, set royalty
August 27, 2013 / 12:22 AM / 4 years ago

INTERVIEW-Mexico aims to gradually cut Pemex tax burden, set royalty

By Luis Rojas, Ana Isabel Martinez and Alexandra Alper
    MEXICO CITY, Aug 26 (Reuters) - Mexico aims to gradually
reduce a crippling tax burden on state oil monopoly Pemex,
replacing a high levy it currently pays with a royalty and a
more flexible taxation scheme, a senior finance ministry
official said on Monday. 
    The plan details an energy reform proposal Mexican President
Enrique Pena Nieto presented earlier this month, which aims to
wean Mexico's government off its dependence on Pemex's aging oil
fields for its tax revenue.
    That in turn would free up Pemex to invest more of
its own revenue to exploit new and mature oil and gas fields in
a bid to stem a near decade-long slide in output.
    It's part of a raft of reforms Pena Nieto hopes to pass to
help boost growth in Mexico, from an already approved measure to
buoy competition in the telecoms sector to a bill aimed at
increasing lending that is slowly moving through Congress. 
    As part of the fiscal overhaul, a levy that forces Pemex to
pay the bulk of its revenue to the government would be replaced
with an income tax, a royalty and a dividend payment, Miguel
Messmacher, Mexico's deputy finance minister for revenue, told
Reuters.  
    "What we want to do is move away from a system based on the
ordinary hydrocarbon tax with a very high rate and a very rigid
scheme ... towards a scheme that is very similar to what other
public companies in other countries face," Messmacher said.
    
    Pemex, the world's 10th biggest producer of crude oil
according to OPEC, has seen output decline by a quarter since
2004. The government collects about a third of its budget from
Pemex in taxes.
    Pemex last month reported its steepest quarterly loss since
2011, at 49 billion pesos ($3.8 billion). 
    The government's plan, which will be presented next month
along with a broader fiscal reform, aims to replace the 71.5
percent ordinary hydrocarbon tax with a "much smaller" royalty,
Messmacher said, though he said the specific rate has not yet
been decided.
    Under the new scheme, Pemex would also pay a dividend that
would be proposed by the finance ministry and approved by
Congress, which would be calculated based on investment plans
reported by the state-oil company, Messmacher explained.   
    He said Pemex would likely start by paying out contributions
to the government that are similar to what it currently pays.
    "Little by little Pemex will set aside more of its profit
after taxes for reinvestment," he said.    
    The regime would go into effect immediately for the new
profit-sharing contracts authorized by the government's proposed
energy sector overhaul.
    Details about the tax regime for these profit-sharing
contracts are not yet known.
    The Pena Nieto's energy proposal, if approved by Congress,
would be the most sweeping reform of Mexico's energy sector
since the government expropriated U.S. and British oil companies
in 1938, but some analysts say it may not go far enough to
entice investors. 

 (Editing by Simon Gardner and Lisa Shumaker)

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