Malampaya contractors set to sue over taxes

The relevant decision was called erroneous.

In a letter to President Benigno Aquino III, Royal Dutch Shell PLC chief financial officer Simon Henry said the recent Commission on Audit (COA) decisions billing the Malampaya consortium USD2.9b in income taxes on top of the government’s 60% share of net proceeds were erroneous.

According to a research note from Maybank ATR Kim Eng, this is since the income taxes payable over the period 2002 to 2014 were to be deemed paid by the Department of Energy (DOE) out of the government share of net proceeds as this was expressly provided for under Service Contract No. 38.

The COA in decisions dated 6 Apr and 11 May this year ordered the DOE to collect the back taxes from the Malampaya consortium.

Here's more from Maybank ATR Kim Eng:

The DOE appealed the COA’s decisions but this was denied. According to local news source Inquirer, various sources from both sides confirmed the Shell-led investors had served notice they were initiating international arbitration.

Back-channel talks are ongoing, however, to try to resolve the issue in a collaborative way between the consortium and the Philippine government, the sources said.