Tuesday, December 18, 2007

Govt, PTT at odds on tax charge

General News - Tuesday December 18, 2007

Govt, PTT at odds on tax charge

Energy giant wants to pay 2% for pipeline use

YUTHANA PRAIWAN and WICHIT CHANTANUSORNSIRI

Officials from the Energy and Finance ministries were at loggerheads yesterday over what rate to charge energy giant PTT Plc for the future use of the country's gas pipeline network.

Finance Minister Chalongphob Sussangkarn reportedly suggested that PTT pay a commercial rate of 5% to 20% of revenues to the government for the use of the pipelines.

But PTT executives expressed shock at the proposed rate, and warned that such a toll would only result in higher energy prices as expenses would be passed on to gas users.

Cabinet ministers today are set to approve a framework transferring PTT's gas pipeline assets to the government, as directed last week by the Supreme Administrative Court.

One source said the ministers, at the last scheduled cabinet meeting of the Surayud Chulanont government, will approve a charge rate of ''plus or minus'' 5%, with the final rate to be settled within three weeks.

The rate is based on a standard framework used by the Treasury Department to calculate charges accorded to other state enterprises for the use of public land. Airports of Thailand, for instance, pays a 5% charge for the use of Suvarnabhumi airport, but only 2% for its provincial airports.

PTT president Prasert Bunsumpun argued in yesterday's meeting that the rental charge should be set at 2%, similar to the rate paid by the Electricity Generating Authority of Thailand for the land used for hydroelectric dams.

But Mr Chalongphob argued that a commercial rate should be used.

''PTT is a profit-oriented company and can absorb the costs,'' he told the meeting. ''PTT should also accept the rate otherwise we face a long suspension of its shares if we need to hire financial advisers to study the issue.''

But Mr Prasert said even a 5% rate was too high. ''If the Finance Ministry really wants us to pay 5% or more, then it is inevitable that the costs will be passed on to gas buyers,'' he said.

Energy Minister Piyasvasti Amranand, seeking to broker a compromise, suggested a 2.5% rate, matching that paid by the Port Authority of Thailand.

Mr Chalongphob rejected the proposal, but said the final decision would be made by the prime minister today.

PTT, which is half-owned by the Finance Ministry, would also have to pay six years of backdated rent for the pipelines, stemming back to the time it was privatised in October 2001. Charges would be offset by the amount PTT has invested in the pipeline network.

Any delay in ascertaining the costs of complying with the Supreme Administrative Court judgement could have significant implications on PTT and the capital market. Trading in PTT shares was suspended last week pending greater clarity about the impact the case will have on the firm.

Mr Piyasvasti said about 30% of PTT's total 3,000-km pipeline network would be transferred to the state, together with equipment and assets along the affected areas of the pipeline route.

Pipelines within the Thailand-Malaysia Joint Development Area (JDA) will be excluded from the transfer as the development was made under a bilateral agreement with the Malaysian government, he said.

Mr Piyasvasti added that tax liabilities involved in the asset transfer _ estimated to be as much as 10 billion baht _ had yet to be finalised with the Finance Ministry. The court on Friday ordered PTT to return assets that had been gained through expropriation to state ownership.

Meanwhile, the Supreme Administrative Court yesterday turned down a new complaint filed by the consumer rights advocates that challenged the legality of PTT's privatisation, requesting the court to detail the procedures for the transfer of public domain under PTT's possession back to the state.

The court ruled that the plaintiffs' complaint yesterday was premature, and that all parties concerned should wait to hear whether the cabinet resolution on the public domain transfer today is appropriate.

The plaintiffs also asked the court to order the cabinet and PTT to list all public-domain assets in PTT's possession which came from PTT's public expropriation rights and outline the plan to compensate the state for those assets.

One of the plaintiffs, consumer rights activist Rosana Tositrakul, said if the cabinet resolution today is not transparent, her group will file a complaint with the court again.

Bangkok Post

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