Tuesday, November 30, 2010

Govt endorses Petronas tax incentives plan

KUALA LUMPUR: The government has endorsed a new plan of tax incentives proposed by Petroliam Nasional Bhd (Petronas) which would potentially lead to additional petroleum-generated revenue of more than RM50 billion over the next 20 years, said Prime Minister Datuk Seri Najib Tun Razak.

He said the tax incentives led by Petronas would be incorporated in the Petroleum Income Tax Act (PITA), stressing that five new incentives were proposed to promote the development of new oil resources, facilitate exploitation of "harder to reach" oil fields and stimulate domestic explorations.

"There will be a notional trade-off of about RM8 billion in the form of revenue foregone from investment tax allowances, reduced tax and the export duty waiver for marginal fields," Najib said during the announcement of Economic Transformation Programme's second round of early wins on Tuesday, Nov 30.

However, the premier pointed out that the benefits far exceeded the trade-off and these measures marked the kind of rational policy changes that would enable the private sector to play a greater role in our economic development.

The new incentives include investment tax allowance of up to 60% to 100% of capital expenditure to be deducted against statutory income to encourage development of capital-intensive projects, reduction of tax rate to 25% from the current 38% for marginal oil field development and accelerated capital allowance of up to five years from 10 years where full utilisation of capital cost deducted could improve project viability.

They also involved qualifying exploration expenditure transfer between non-contiguous petroleum agreements with the same partnership or sole proprietor to enhance contractor's risk taking attitude as well as waiver of export duty on oil produced and exported from marginal development to improve project viability.

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