BP clean-up fund could tap into taxes
Oil absorbent material lies on a beach as high winds and waves caused the cancellation of cleanup operations in Port Fourchon, La. -- July 7, 2010
TEXT OF INTERVIEW
Steve Chiotakis: BP today is going to test a cap it successfully put on its spewing oil well in the Gulf of Mexico. Robots secured a stack of valves on top of the broken well yesterday, which the oil giant says should stop the flow temporarily. Work continues on relief wells that're supposed to eventually stop the oil altogether. BP estimates it's spent somewhere around $3.5 billion on the spill -- and there's a ton of work to do. Now the Financial Times reports money that's being paid for clean-up could very well tap into the amount BP was going to pay in taxes, here in the United States and to the U.K. Vincent Boland is with the Financial Times Lex commentary team. He's with us from London. Hi there Vincent.
Vincent Boland: Hello.
Chiotakis: So how much is BP saving in taxes?
Boland: Well, it looks like they're going to pay $10 billion in tax payments over the next four years, which is quite a lot of money if you're a treasury minister.
Chiotakis: So is it using the clean-up effort to seek a deduction?
Boland: Some of it might be tax-deductible, but that would be a smaller portion. The main thing is that the money that it pays to clean up the damage comes out of its profits. Taxes are also levied on profits, so there would be less in profit on which to levee taxes.
Chiotakis: I understand, the company makes less money, so it's going to be taxed less. But what I don't understand is why the governments perhaps don't hit the company even harder to make up for that lost revenue.
Boland: Well they may do so, but I think it would require particular decrees or legislation of some kind to do that -- or some kind of declaration that they are imposing a special levee on BP. I'm not sure that either the American or the British government would want to do that, at least for the moment, because the tax shortfall -- although it's significant over, if you add it all up -- probably over a four-year period, it is not that huge, given the enormous amounts of money that both governments collect anyway in taxes. But it is, it's quite a headline figure, this $10 billion that they can save over 10 years. So I think they probably will be placing the pressure on both governments to make it up elsewhere.
Chiotakis: Vincent Boland from the Lex column at The Financial Times. We thank you.
Boland: Thank you very much.