27/07/2020
At a parliamentary session on the morning of November 14, 2016, Tunisia’s Finance Minister announced a budget deficit of over 3.9%. The Minister, Lamia Zribi, attributed the deficit to a variety of reasons, one of which was the failure of the Tunisian Enterprise of Petroleum Activities to pay the accrued revenues owed to the state.
In that same period, oil revenue in Tunisia amounted to less than 2%
of the country’s GDP, according to World Bank data.
This investigation documents the lack of transparency and clarity in
the data released by the Tunisian government, as found through a
comparison of its revenues from the taxes and fees levied from foreign
companies, with the amounts that those companies stated they had paid
to the Tunisian authorities. The investigation also demonstrates that
there is a defect in the way taxes are calculated, collected and
declared, in addition to legal imbalances in the contracts held
between the Tunisian Enterprise of Petroleum Activities and foreign
oil companies.
The obtained data shows the discrepancy between what oil companies
declared they had paid the Tunisian government, and what the Tunisian
government claimed to have received. The total payments announced by
the oil companies amounted to $1,034,000,000, (2,036,000,000 Tunisian
Dinar) in the form of “taxes”, “operating fees” and “drilling fees” to
the Tunisian government. While comparatively, the Tunisian government
announced that, in those same years, it received a total of just over
1,799,000,000 TND from these same companies.
The difference between oil companies’ declarations and that of the
Tunisian government amounts to around 406 million TND ($164 million).
Meanwhile, data from the five companies indicate that they paid 2204.4
billion TND ($1022.8 million).
Annual reports published by Tunisia’s Finance Ministry detail the
total amount collected in taxes from all entities for the state
treasury. In the case of oil companies, the Ministry only publishes
the total amount of operating fees and royalties instead of listing
amounts from individual companies. Additionally, it does not specify
the value of in-kind contributions from oil.
Importantly, oil revenues consist of the royalties the state receives
from the production of crude oil and natural gas and other oil based
manufactured products. As of 2012, it was included within the income
derived from the taxes on petroleum companies. Moreover, the
supplementary Finance Law of 2015 adopted the principle of separating
fuel marketing operations.
For his part, Professor Sharaf al-Din Yaqoubi, the national
coordinator of the Tunisian Coalition for Transparency in Energy and
Mines considers this system to be flawed and confirms that the numbers
provided by the Ministry of Finance are gross figures that are not
detailed, nor based on each individual company’s levy.
“The Tunisian state should publish its revenues from the oil companies
in detail, based on each company. It should also state the types of
royalties, taxes and fees paid so that we can compare the information
from both sides accurately,” Yaqoubi said.
He added that several issues make us wonder where the money goes.
These include the complete lack of transparency from the Ministry of
Finance and its tax system, in addition to the numerical discrepancy
between what these companies publish in London and in major stock
markets, and the figures that come out of the Ministry.
In 2016, the Finance Ministry’s financial bulletin stated that its
fuel revenues for that year amounted to 418 million TND ($179
million). This amount contradicts with what the oil companies
announced in their reports from the same year, which amounted to over
544 million TND ($316 million) – 126 million TND ($53 million) more
than what the Tunisian government claimed.
Hussam Al-Din Khalifa, a lawyer who specialises in economic issues, confirms that the Tunisian state does not exercise any real control over the process of oil companies’ fuel extraction, and that it does not have accurate statistics that reflect the extracted quantities. He explains that taxes are calculated based on oil companies’ statements.
The lack of transparency is not only evident through the analysis of
data about petroleum companies’ taxes, but also in the final figures
of total payments received as published by the Ministry. Based on the
2016 Finance Law, the Ministry of Finance estimated its revenues from
taxes paid by petroleum companies to be 1,048 million TND.
This amount later fell by less than half, as at the end of 2016, 418.9
million TND were collected in taxes. This figure does not at all match
the gross amount paid by the oil companies. The same discrepancy
occurred in 2017.
Dr. Yassin Bin Ismail asserts that there is a grave defect in the
applied method for collecting taxes. This is clear in the gap
between what the Ministry of Finance expects in its general budget
and supplementary budget law on the one hand and the tax income it
collects from petroleum companies on the other.
This also indicates that its calculation process does not meet
international accounting standards. This is clear as the estimated
figures that were approved in the state's general draft budgets do
not match the final revenues registered as the state's tax income
from the oil companies.
Bin Ismail notes that the Tunisian government’s approach is obscure
and far from transparent or show that it upholds good governance.
This is clear in the government and through its Ministry of
Finance’s refusal to publish detailed tax statements as compiled for
each company. They also fail to specify the start dates of the
fiscal years for of these taxes and their end, casting doubt on the
credibility of the figures published by the government and even by
the companies themselves. Additionally, this raises questions about
the fate of those funds, considering the difficulty of determining
the authenticity of the information supplied by the state due to
lack of regulation, while the companies continue to withhold
detailed accounting figures.
Bin Ismail says: “The Ministry of Finance and its specialised
structures fail to apply in-depth mechanism of oversight for
companies including the Tunisian Enterprise of Petroleum Activities
for taxes. This shows deep imbalances and violations in the Tunisian
administration's relationship with the aforementioned companies.”
In addition to local experts, international entities also criticise
the approach of the Tunisian government and its Ministry of Finance.
This criticism is mostly directed towards the Tunisian government’s
blackout policy in the announcement of their public budgets as well
as their failure to respect the public’s right to access
information.
In 2019, the International Budget Partnership (IBP) published a report revealing the poor transparency index of Tunisia concerning its “open budget.” The “Open Budget Survey” is a global program for research and advocacy to enhance the public’s access to budget information and the adoption of budget systems.
According to that report, Tunisia scored 35 points only out of 100, putting it in 82 place among 117 countries (countries must score 60 points and over according to the index to be considered a state with transparent and sound financial system).
The report has given the public participation in preparing the
budget in Tunisia a poor 17 points out of 100, while its oversight
mechanism has scored only 45 out of 100. The report called for
ensuring that the High Committee for Administrative and Financial
Control (HCCAF) in Tunisia has sufficient funding to perform its
tasks, as would be specified by any independent body. It should also
ensure that audits are reviewed by an independent agency. Perhaps
the most important recommendation in the report called on the
Tunisian Ministry of Finance specifically to work to implement
important reforms to uphold its transparency and to reform the
process of preparing the budget and following-up on it. The report
also called for the speedy publication of its audited financial
reports.
A report entitled “Secrets of Hydrocarbon Contracts in Tunisia” published in 2018 has revealed clear imbalances and profound violations in how the former Ministry of Energy and some state officials favour to always deal with the same oil companies. 17 cases of instances of discrimination among investors were revealed by this report, in addition to five cases of extending privileges to the same companies in an illegal or unjustified way. The study also revealed in its analysis of the contracts published by the Ministry of Industry June 14, 2016, that there are three cases of serious violations to the terms of agreements of digging permits that require investigation.
The Miskar and Asdrubal gas fields are among the most important in
Tunisia under the Amilcar license. Miskar’s production of crude oil
and liquefied gas decreased during 2018 to 77 kilo-tonnes, compared
to 98 kilo-tonnes produced in 2015.
The Tunisian government granted British Gas a permit to exploit the
Miskar crude and liquefied gas fields which is the largest in
Tunisia, during 2015 for only $54 million on a non renewable basis.
One year later, it granted Royal Shell Company permit to exploit the
field, for tax payments with a value much less than that paid by
British Gas; amounting to only $16 million.
On June 18 our investigator was informed by Mr. Rafiq Bin Abdullah,
member of the Access to Information Association, of the issuance of
a final decision in favour of the plaintiff.
The Commission’s board forced the Ministry of Finance to provide the
plaintiff with copies of all the information. To date, however, the
reporter has not received any such material from the Ministry of
Finance.
Numerous forms of legislation govern the fuel sector in Tunisia,
including laws and decrees of the hydrocarbon code. These include
very old laws - some of which were written over a century ago - that
the Tunisian state struggles to cancel in its talks with investors.
Examples include the special agreements system, Decree No. 9 of 1985
and even the hydrocarbon code itself, which requires urgent review.
Sharaf Al-Din Al-Yaqoubi explains, “We need to revisit the
hydrocarbon code in order to embed new ideas of governance and
transparency within it. For example, publishing contracts details is
not binding because there are no laws that oblige the state to
publish them. This is in addition to the importance of publishing
assessments of the environmental impact of oil and gas exploitation
on the areas in proximity of the wells for the medium- and
long-term.
Tax adviser and member of the National Tax Council, Muhammad Saleh
Al-Ayari, believes that the necessary reforms in this area are
essentially related to making tax legislation more compatible with
international standards specially in matters related to pricing and
conversion. Several procedures have been included in the Finance Law
of 2019; these are mainly related to controlling the tax levy from
institutions settled in Tunisia, but are also connected to other
(foreign) companies that are part of other audit and controlling
entities.
Al-Ayari asserts that the execution of these procedures, however,
have not been applied yet, pending giving tax return officers the
necessary training in this sector and the issuing of regulatory
templates.
These measures would have contributed in general to limiting the
phenomenon of tax evasion among institutions operating in Tunisia
and among institutions operating in the fuel sector in particular.
It is thus more effective to update Law No. 93 of August 17, 1999
related to the issuance of the hydrocarbon code. Nearly 20 years
have passed since its issuance, and some necessary improvements
could be introduced regarding the conditions for granting licenses
for exploration, exploitation, digging, monitoring, as well as
follow-up processes, especially in relation to controlling costs and
overheads in a transparent manner. Such practices would limit the
phenomenon of tax evasion as much as possible in a key sector that
does not contribute sufficiently to the development of the state’s
budget resources when it comes to tax liability.
Despite the importance of the hydrocarbon sector, and all the talk
about corruption in endorsing oil-digging licenses for petroleum
companies, the former Tunisian government led by Youssef Al-Shahed
decided to eliminate the Ministry of Energy portfolio in August
2018. This came after the dismissal of a number of officials
including the former energy minister Hashim Al-Hamidi. Other
officials include the two general directors for legal and fuel
affairs and the President and the director general of the Tunisian
Enterprise of Petroleum Activities. These eliminations and
dismissals were carried out without any (agreed) reform program,
justifications or even accountability.
Last February, the Ministry of Energy, Mines, and Energy Transition
was re-established under the government of Elias Al-Fakhfakh, but
Minister Manji Marzouk is up against a set of urgent reforms that he
must pursue, according to Sharaf Al-Din Yaqoubi.
He stresses the necessity of restructuring the Ministry,
highlighting that its elimination in the past was a wrong decision
that greatly damaged the fuel sector and exposed its problems
without finding solutions.
Yaqoubi stresses the necessity of clearly defining responsibilities
in order to facilitate the process of accountability. He believes
that it is necessary to establish real authority over the fuel
sector and those interfering in it, as the leniency shown by the
state will only increase its financial and material losses;
aggravate corruption; and open the door for impunity.