Passions around Kazakhstan’s petroleum pie
by Gulmira Kenjegalieva
A paradoxical situation is being formed in our country around the taxation in the oil industry. Kazakhstan that
receives but miserable amounts from the development of its oil fields returns the value added taxes to big subsurface
users, which means huge amounts lost. It concerns mainly the companies operating on the basis of Production Sharing
The national treasure returned 4 bn tenge to Karachaganak Petroleum Operating last year, this year this figure has already reached 3 bn. Moreover, the export transactions are taxed at a zero rate here. To put it simply taxes are not levied at all for the export of hydrocarbons. And the tax committee notes that the amount of VAT to be returned grows in proportion with the increase of oil and gas export sales. It means that a growth of production and export is not particularly profitable for the republic.
Last year 38 mm tenge were returned to ZhaikMunai which earned 2 bn tenge from the export. Since the beginning of
this year 19 mm tenge have already been returned to the company from the state budget. Russian scientists, who
visited Uralsk, expressed their perplexity about the taxation of the subsurface users, pumping out billions tons of
petroleum resources and paying miserable taxes to Kazakhstan. In Russia itself the export taxes are very big.
The taxation of main subsurface users in West Kazakhstan province is 4-7 %, although other Kazakhstani ventures that are not hydrocarbon producers bear 20-30 % tax burden. But all of them were overran by a US company Steppe Leopard, from which West Kazakhstan province does not receive a penny and it is considered lawful.
At least, this circumstance, according to tax payers, is stipulated by an agreement signed in the mid-nineties. And
one more venture buys condensate on Karachaganak and sends it to an offshore zone, while the state budget has nothing
else to do, but to return the "zero" on export. As they say, it flows along the whiskers, it doesn't fall intothe
The local treasury virtually does not receive a penny from the development of oil fields, no matter whether they are big or small, the main part of the money goes into the national budget. True, 10 % of Kazakhstani share from Karachaganak had been coming into the budget of West Kazakhstan province, but then it was suddenly stopped. It appeared that the region originally had not had a right for that money.
According to the deputy governor of West Kazakhstan province Marat Abdrakhmanov, as per agreement between the
government of Kazakhstan and the alliance of foreign companies, originally all 100 % of Kazakhstani share from
Karachaganak had to come into the national budget. It appears that the province was using a 10 % piece of a big pie
It's good that the government persons have had enough wisdom not to demand that money back from the province that is in a budgetary crisis. Petroleum pies are very big in Kazakhstan indeed, but the local population obtains nothing from this lordly pie.