On Friday, the price of oil shot into record territory, past $90 q barrel. That's awful news for all of us who buy gas at the pump, but the news is tremendous if you own an oil company like Belize Natural Energy.
And foreseeing windfalls like that, in August of 2006, Cabinet proposed something like a windfall tax. It's called a resource rent tax or RRT. 7NEWS has obtained a Cabinet paper, number 66 of August, 2006 which shows the proposal from the Ministry of Natural Resources to apply this tax. The Cabinet paper advises that the RRT will be payable when the oil company has achieved a certain thresh-hold rate of return on its total funds invested.
Generally foreign companies hope for a 15% rate of return on investment - but in a time like this when oil prices are soaring, experts estimate that Belize's Natural Energy's rate of return is very much more than 100%. And that's when the proposed rrt would come in. Taxing at an incremental rate once it crosses a certain return rate, ensuring that if the oil company makes a killing in an oil price boom, Belize still gets something.
It's a proposal that would surely have put Belize in good stead as world oil prices are spiraling out of control but it seems cabinet - "in its wisdom" - decided not to implement it.
