Tax Targets: Today, Oil Companies; Tomorrow, Another Industry
The Senate Finance Committee has a hearing scheduled for Thursday, “Oil and Gas Tax Incentives and Rising Energy Price,” to which executives of a select few oil companies have been invited.
“Frankly, we are an attractive target,” said Ken Cohen, ExxonMobil’s vice president of public and government affairs. “I think the term I used was ‘irresistible’ right now for politicians to whale away.”
Cohen and Jaime Spellings, ExxonMobil’s vice president and general tax counsel, spoke this morning on a conference call for bloggers organized by the American Petroleum Institute. Much of the discussion centered on the issues of profits and taxes Cohen detailed in a recent post at ExxonMobil’s Perspectives blog, “ExxonMobil’s U.S. taxes and U.S. earnings – Some relevant numbers for Washington.”
Oil companies are today’s target, but other industries and the public at large should be concerned, Cohen argued.
I just hope that we can have at some point … some rational discussion of what the country’s tax policy should be. And other large industries should also take note, or actually any industry.
Today it’s ExxonMobil and the oil companies that are on the block, but what about tomorrow, what about other industries? And shouldn’t all of us be focused on what is effective tax policy? How do you make an investment, particularly in a large capital intensive business, when you’re not sure what the rules are going to be, quarter to quarter or year on year?
For ExxonMobil, the energy that you’re using today is the result of investments we made in some cases two decades ago. Certainly the oil that’s coming on stream today was the result of years of planning and then execution and drilling. It takes seven to ten years for a large oil and gas project to go from the planning stage to delivery.
We take the risk, we take the market risk, but what we ask policymakers to do is be consistent in the application of their rules.
Actually, there is a consistency, a perverse one. Whenever gas prices spike, some politicians target specific oil companies based solely on their size and PR vulnerability. This arbitrary, politically motivated exercise of the power to tax is the exact opposite of the rule of law. Darn right other companies should pay attention…and watch out.
For more on these issues, see Cohen’s April 27 post at Perspectives, “Gas prices and industry earnings: A few things to think about the next time you fill up.”