The Albanian government will pay back Canada-based Bankers Petroleum $37 million after losing a tax dispute battle with the country’s biggest oil producer which is about to be taken over by a Chinese company, in a situation which could put Albania in new financial straits following a mid-year budget cut.
The outcome comes after Bankers Petroleum suspended arbitration proceedings over a $57 million tax dispute dating back to 2011 last February and agreed to pay back the disputed amount in instalments as PwC, one of the Big Four auditors, was hired as a third-party auditor to settle the dispute which escalated in late 2015 with the freeze of the company’s bank accounts.
“The decision is a final resolution, and, as such, the Albanian tax authority will recalculate Bankers’ tax obligations for 2011 and determine the appropriate mechanism to settle or reimburse Bankers for the payments made to date. The Company had paid a total of $37 million as of June 30, 2016 to the Albania tax office as deposits for the 2011 profit tax assessment,” Bankers Petroleum said in a statement.
Canada-based Bankers Petroleum, the country’s largest oil producer, posted record high losses of about $34 million in the first half of this year due to a slump in international oil prices affecting oil production, exports and government revenue.
The Canada-based company which has been operating in Albania for more than a decade expects the C$575 million (€392 mln) sale deal with China’s Geo Jade to conclude by Sept. 30, otherwise it can claim $20 million in compensation.
The takeover has been held back by a final approval by the Chinese State Administration of Foreign Exchange, SAFE.
The amount the Albanian government will pay back to Bankers Petroleum is almost twice higher compared to the mid-year budget cut.
The 2016 budget faced a surprise mid-year cut in late July when spending was cut by 0.7 percent (Euro 22 million) to 450.2 billion lek (Euro 3.24 billion) to handle overoptimistic forecasts.
Last year, the Albanian government cut the budget three times to handle the sharp decline in international oil and mineral prices affecting exports and handle a slowdown in consumption. The GDP was also revised to 2.6 percent, down from initial expectations of 3 percent.
The Albanian government expects growth to accelerate to 3.4 percent in 2016 and 3.9 percent in 2017, forecasts which are 0.2 percent to 0.4 percent more optimistic compared to expectations by the European Commission and international financial institutions.