The problem of the state not receiving the required amount of fair share from oil-producing companies has recently become an issue in a range of UAE states (CERA, 2011). The significance of the problem is quite high given the fact that there is a need to both sustain the success of private entrepreneurship and keep the state budget high (Fiscal Regime Design, 2015). Despite the rather extensive CIT taxation rules that oil and gas companies are obligated to follow, the number of taxes submitted by the local companies is quite low, which means that the reconsideration of the current framework might have to be carried out (Inkpen & Moffett, 2011).
Indeed, the fact that the companies operating in the identified industry are exempt from custom duties and VAT as far as equipment and raw materials, as well as other supplies, products, and services, are concerned, shows that the identified firms may be viewed as a possible source of financial issues that the Moroccan budget may be affected by in the future. Indeed, the fact that the elements of the target companies’ operations mentioned above are exempt from not only taxation but also custom duties may imply that the state suffers from being underpaid (Clifford Chance, 2014).
One might argue that Moroccan oil and gas companies are already supposed to have a range of liabilities to meet. Indeed, the royalties that the local entrepreneurship leaders pay to the corresponding partners are rather high (Global oil and gas tax guide, 2014). The necessity to face numerous liabilities that mature quite fast is exhausting for Moroccan oil and gas companies, which means that the organizations may be unable to pay the required fair share to the state (Fiscal Regime Design, 2015).
The taxation of oil and gas projects makes 39.6% in Morocco, which can be considered rather high (White, 2015). Therefore, the state’s share in projects seems moderate. Consequently, increasing the taxation rates for oil-and-gas-related projects is not necessary. Instead, basic processes need to be revisited.
The fact that the percentage of the state ownership of the companies’ assets and the participation in the corresponding activities are not to exceed the mark of 25% should also be brought up (Morocco – ten things to know about oil and gas, 2013). By restricting the degree to which the state authorities may exert their power over the firms’ actions, the state regulations provide the identified organizations with enough flexibility in decision-making. However, because the percentage of possible ownership is, nevertheless, quite high, one may assume that the leaders of Moroccan firms may suffer losses once the state authorities are admitted to partake in the corporate decision-making process.
Thus, increasing the number of taxes for the target organizations to pay to the state needs to be viewed as a possibility. The fact that the Moroccan state budget does not receive its fair share from the identified organizations shows that the current situation may become potentially dangerous for the sustainability of the Moroccan state financial strategy.
Reference List
CERA (2011) Comparative assessment of the federal oil and gas fiscal system. U.S. Department of the Interior Report.
Clifford Chance (2014) Oil and gas regulation in Morocco: one of the most attractive schemes in the world. Casablanca briefing note.
Fiscal Regime Design (2015) Natural Resource Government Institute Report.
Global oil and gas tax guide (2014). Web.
Inkpen, A. C. & Moffett, M. H. (2011) The global oil & gas industry: management, strategy & finance. Tulsa, OK: PennWell.
Morocco – ten things to know about oil and gas (2013).
White, D. (2015) Oil and gas guide for Africa. Web.