In a new report launched today in Washington, DC, Oxfam calls on governments to fight the resource curse through more effective auditing and public oversight mechanisms.
The report, Examining the Crude Details: Government Audits of Oil & Gas Project Costs to Maximize Revenue Collection, outlines how governments can reduce the risks of profit shifting by multinational oil and gas companies through more effective audit practices and makes the case for more public information. The report also highlights several challenges to petroleum cost auditing and makes a series of policy recommendations for governments and other actors.
“The petroleum sector generates enormous profits that, if effectively taxed, could help fund the fight against poverty, reduce inequality, and contribute to economic development,” said Daniel Mulé, Senior Policy Advisor at Oxfam America. “Unfortunately, when multinational oil and gas companies overstate costs paid to another subsidiary, they shift profits from extractive projects offshore, they avoid paying taxes, and they leave citizens and communities with little to show for their natural resources.”
Countries are looking to benefit more from petroleum profits, said experts at the event. But the report notes that resource-rich countries could be using their audit rights more effectively to control costs and ensure they get what is legally owed.
“There is wide enthusiasm for the potential of petroleum to transform countries, especially among new producers like Kenya,” said Mulé. “But governments need to get serious about auditing costs. Citizens also need assurances that they aren’t being fleeced by companies and that their government isn’t leaving money on the table.”
The report looks at how international development partners can assist countries improve their revenue collection by providing technical assistance that empowers governments to more effectively audit petroleum projects. But, the report notes, donors must insist on better public oversight of audits.
“To counter the resource curse, governments not only need more effective audits but audits that are bolstered by strong accountability measures,” said lead report author and transfer pricing expert Alexandra Readhead. “Governments should publicly disclose audit information and strengthen public oversight institutions’ capacity to monitor and publicly report on how government uses audits to protect the state’s petroleum revenues.”
“The extractive industries present enormous opportunities to fight poverty,” said Mulé. “It is past time to closely examine the details of these petroleum projects. Oxfam will continue to encourage countries to exercise their right to audit and promote citizen accountability with more transparent public oversight.”
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