Saudi tax change curbs oil-price upside for Aramco IPO investors
london — Saudi Arabia has overhauled the royalty system that taxes oil giant Aramco, creating a new levy on revenue with a marginal rate of 50 per cent when crude rises above $100 a barrel, according to financial information seen by Bloomberg News.
The oil price-linked royalties were introduced last year and replaced a 20 per cent fixed levy on revenue that had served for decades.
The change, made without any public announcement, is significant for the planned initial public offering of Aramco — potentially one of the biggest events in financial markets for years.
Saudi officials have said they hope to raise a record $100 billion by listing the world’s largest oil producer, valuing the company at about $2 trillion and dwarfing rivals like Exxon Mobil Corp and Royal Dutch Shell.
Rising royalties would direct more of Aramco’s revenue to the kingdom and limit the gains to investors from higher oil prices after the IPO.
Asked to comment on the figures, the company said in a statement: “This is inaccurate, Saudi Aramco does not comment on speculation regarding its financial performance and fiscal regime.”
Since January 1, 2017, Aramco’s royalties have been “calculated based on a progressive scheme” linked to oil prices, according to the information seen by Bloomberg.
The new system has a marginal rate of 20 per cent of revenue for oil prices up to $70 a barrel, 40 per cent between $70 and $100, and 50 per cent when crude’s above $100.