Oil
Spain Faces threats over Fuel Tax
MADRID – Spain’s regional and central governments could be liable to refund billions of euros to businesses and consumers if Europe’s top court follows an opinion filed Thursday that said a Spanish tax on gasoline and other petroleum products breached European Union law.
The opinion from Nils Wahl, an advocate general at the European Court of Justice, acknowledged that there was a risk of “serious economic repercussions” if the court were to rule against Spain. But he said the government in Madrid had repeatedly ignored warnings not to proceed with the levy, which was in effect from 2002 until 2012.
“In fact, Spain appears to have knowingly taken the risk of going forward with the legislation in question and, as a result, that legislation has been applied for many years to the detriment of the end-user and the internal market,” Mr. Wahl wrote.
A spokesman for Spain’s Budget Ministry said the government wouldn’t comment until the European court itself rules. The Luxembourg-based court follows the advocate general’s advice in the majority of cases before it.
The Spanish stock market brushed off the potential additional burden to Spain’s already strained budget, however. Shares on Spain’s IBEX-35 blue-chip index were up strongly during the session.
The case involves what is dubbed the “health cent”—a tax on gasoline and other petroleum-product sales created by the central government to help regional governments finance health-care spending.
In addition to the nationwide 2.4-cent-a-liter tax, regional authorities were allowed to tack on extra regional taxes. The funds collected were used to build hospitals and expand other health-care services.
However, Mr. Wahl said he believed that the tax breached an EU law that seeks to prevent the levying of indirect taxes that create obstacles to EU trade. He said it breaches part of the law that says such taxes should only be levied for a specific, non-budgetary purpose.
It is unclear how big a hit Spain’s government ultimately could face if the court says it needs to refund the illegal tax—or even how it would manage to do so, given that the purchases date back over a decade.
In his opinion, Mr. Wahl said the Spanish government estimated that the taxes collected could amount to €13 billion ($18 billion). Lawyers for the Spanish government estimated that just the interest due for tax paid through 2011 would amount to about €3.3 billion.
They also argued that figuring how much individuals are entitled to would be a daunting task and too costly at a time that the government is struggling to slash its huge budget deficit.
They asked that the court, if it rules against Spain, limit the refunds to only those who have filed lawsuits in the case. Under Spanish law, taxpayers can demand refunds up to four years after paying their taxes.
The lawsuit was brought by a Catalan trucking company, Transportes Jordi Besora S.L., which is seeking repayment of €45,632.38 in taxes paid from 2005 to 2008. The company’s lawyer, Irene Mallol, said she has also filed a claim seeking recompense for the remaining years through 2012.
Hundreds of other cases are pending, and taxpayers might claim perhaps as much as 10% of the health cents paid, Ms. Mallol estimated.
Still, the government likely will delay any compensation, given its straitened finances, said Enrique Chinchilla, a tax professor at IESE Business School in Barcelona. “Whoever wants their health cent will have to wait in line. I imagine they’ll need a lot of patience,” he said.
Spain replaced the health cents at the beginning of 2013 with different national and regional taxes on hydrocarbons, which the government believes complies with EU law.
The Nigerian National Petroleum Company Limited (NNPC) has unveiled a bold strategy to reduce methane emissions in the oil and gas sector by 60% by 2031, with an ultimate goal of achieving net-zero emissions by 2060.
This announcement reinforces Nigeria’s leadership role under the Global Methane Pledge initiative and its commitment to tackling climate change.
The Group Chief Executive Officer of NNPC, Mele Kyari, disclosed these plans during a meeting on Thursday with Robert Leahman, the U.S. State Department’s Global Methane Program Manager, and a delegation from Deloitte.
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The discussions, held at the NNPC Towers in Abuja, focused on collaborative efforts to reduce methane emissions through innovative and sustainable practices.
“Reducing methane emissions is not just an environmental necessity but also a strategic imperative for Nigeria’s energy transition. We are leveraging partnerships to adopt global best practices and innovative solutions,” Kyari stated.
Key among these efforts is a pilot project in the Niger Delta, aimed at establishing emissions baselines, mitigating methane leaks, and promoting sustainable operations across Nigeria’s energy sector.
The project, a partnership between NNPC, Deloitte, and the U.S. Bureau of Energy Resources, will utilize data-driven methodologies to pinpoint and address methane hotspots.
Robert Leahman commended Nigeria’s proactive stance, describing it as a benchmark for other nations on the continent.
“Nigeria’s leadership under the Global Methane Pledge sets a standard for the continent. These initiatives will not only help reduce emissions but also drive sustainable development in the energy sector,” he said.
Kyari highlighted the broader benefits of addressing methane emissions, noting its significance for both environmental protection and economic efficiency.
“This collaboration is a game-changer. By addressing methane leaks, we’re reducing waste, saving costs, and protecting the environment. It’s a win-win for our economy and the planet,” he added.
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
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