By Maria Lopez Conde, Senior Contributing Reporter
RIO DE JANEIRO, BRAZIL – State-controlled oil giant Petrobras is in danger of seeing its commercial transactions come to a grinding halt after the Procuradoria Geral da Fazenda Nacional (National Treasury Attorney-General’s Office) got a Rio de Janeiro Federal Court to recognize the petroleum producer’s nearly R$7.3 billion debt with the National Treasury and cancel its ability to emit debits.
This effectively bars the country’s biggest company from engaging in any type of transaction or bidding process.
According to the Receita Federal (National Treasury), Petrobras owes the government that multibillion dollar amount for unpaid Income Tax Withheld at Source (Imposto de Renda Retido na Fonte – IRFF) between 1999 and 2002.
The legal quarrel involves taxes levied on business done by Petrobras abroad to pay for the shipping of movable platforms.
Petrobras affirms that it does not owe the Brazilian government any taxes, for that deal was carried out and crystallized in the United States. Petrobras has been battling the tax evasion claims since 2003.
Petrobras attempted to get an injunction from the Supreme Justice Court (STJ) to stop the Rio Federal Court’s decision yesterday, but its request was denied.
According to the report, which first appeared in Folha de São Paulo, Petrobras alleged that the decision causes the oil producer to lose most of its power to operate, losing its capacity to “import petroleum to supply the national market.”
Petrobras “will be barred from exporting its production, will not find it possible to participate in bidding rounds by the ANP, including pre-salt, and will not be able to benefit from fiscal and federal benefits, etc.”
“In fact, without the certificate to emit debits,” Petrobras said in a letter to the STJ, as reported by Folha, the company “will not be able to carry out its activities regularly, which does not only harm the company, but also the national economy as a whole.”
In the document it submitted to STJ, Brazil’s largest petroleum producer claim the debt amount is too “bulky” and that the company is facing a “lack of availability of cash,” which has led it to reduce its own budget in relation to pre-salt and to capture foreign money to honor its investments.
In March, the company announced it plans to invest over R$470 billion until 2017 to fund the expansion of its output capacity, with over sixty percent of that amount destined to increasing exploration and production, amid a continued decrease in production output and successive profit losses.
To make good on its promise to keep investing, Petrobras, which saw lackluster production output last month, is increasing its debt.
Read more (in Portuguese).
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