The serious socio-environmental effects caused by the spill of 6,000 barrels of oil by Repsol could mean a economic opportunity for the company. Incredibly, the oil company, which has already caused a second oil spill, would be able to access the tax deduction for the expenses it made in its containment plan, in addition to environmental remediation. This was explained by specialists consulted by this means.
The contamination generated by the La Pampilla refinery (Ventanilla) on January 15 has already reached at least the province of Huaura, although it could have spread to Chancay. The containment plan that Repsol presented in 2015 includes the possibility of compensate third parties who were affected. Thousands of fishermen and tour operators have stopped their activities throughout the contaminated area. The consequences on the health of the inhabitants are not yet known.
Delivery of food and medicine is tax deductible
In accordance with current regulations, the fines that the authorities impose on Repsol do not apply to be tax deductible. However, the actions within the contingency plan, such as the delivery of food to victims, they could qualify for this tax advantage.
“There is no tax rule that prohibits tax deduction. So what companies have been doing is making them deductible by applying the general rules of Income Tax,” tax attorney Carlos Trinidad explained to La República. Those responsible for the oil company are capable of take advantage of “gaps in the income tax law, the lack of application of environmental law and international environmental standards by tax officials”, explained the expert.
Jorge Picón, also a tax attorney, agreed that the actions of Repsol’s containment plan would be tax deductible. “Repsol, like any other company, if you have some type of accident —what the insurance does not cover—, what you spend out of your pocket and is not reimbursed by insurance, I would understand that it would be tax deductible to calculate the utility,” Picón said.
Amazon: background in favor of oil companies
Carlos Trinidad is the author of the report Oil Spills and Tax Deductions, published in 2021 by CooperAcción. In this document, the lawyer details that the Tax Court (TF) —the last administrative instance to resolve controversies between taxpayers and the Tax Administration— issued 12 resolutions where it accepts that oil operating companies in the Amazon deduct taxes for food delivery after oil spills.
Trinidad questions such resolutions because “they stem from an oil spill, of absolute responsibility of the operating companies”. It points out that, in accordance with the “principle of internalization of environmental costs”, of a constitutional nature, “the costs of implementing a contingency plan should be assumed by them (hydrocarbon operators)”.
“Any citizen cannot be sure (that Repsol will deduct taxes) because that information is confidential due to the tax reserve, but the existence of this jurisprudential background is a clear indication of how companies have been acting and how the State has been allowing that they are deductible,” said Trinidad Alvarado.
Tax deduction for environmental remediation
Environmental remediation is a process that reduces hydrocarbon particles that are not visible to levels that do not pose a risk to people and the ecosystem, as reported by Profonanpe. These actions are taken after the first cleaning that has been carried out, and would also be tax deductible by Repsol.
“Using the same arguments that the TF uses to allow the deduction of contingency plans, remediation can easily be deduced,” says Carlos Trinidad. The reasons of this court “are so dangerous that would allow justifying the deduction of the spill”, warns the expert in taxation and environmental law.
The lawyer Jorge Picón also considers that Repsol could deduct taxes from the subsequent remediation that it will carry out in the affected areas. “The company is not dedicated to spilling oil into the sea, but if it has happened and it has to pay compensation and has to incur expenses, they will be deducted to collect their utility,” emphasizes the partner of the Picón y Asociados law firm.
“It’s really unfair”
The tax deduction that Repsol could access after the environmental disaster it caused would mean that the State will receive less income tax. “It’s gravitational. There is not a very deep investigation on this due to the lack of tax transparency, but it is really unfair”, Trinity sentences.
“The financial effect is that: since they are deductible, the State does not receive that amount and we all subsidize it with our taxes”, clarifies the tax expert. Repsol is in a position to “be able to deduct expenses that could not be deducted in any other part of the world,” remarks Trinidad, for whom this oil spill demonstrated that Peruvian environmental regulation is not as restrictive as certain sectors advocated.
Sunat can prevent Repsol from deducting taxes
Specialist Jorge Picón confirmed that, in his experience, he has seen cases of tax advantages in the mining sector. “Indeed, the payments made to the populations or eventually the compensation, or the works that the company had to do to be able to carry out the environmental remediation, have been deducted,” he explained.
In cases where the company is responsible for environmental damage, tax deduction should not be possible, considers Trinidad. “What can be done is to require Sunat to supervise“, keep going. “Sunat has all the elements of judgment to, in the case of Repsol, verify that they are not deducting taxes. This entity has sufficient support from environmental regulations to avoid it,” he warned.
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