Oil Slop Leads to $71 Million Tax Dispute

September 7, 2015 New Zealand Taxation

The New Zealand oil industry could be facing a NZD 71 million tax bill, as Customs claims nearly 30 years of back taxes.

Late last week Z Energy announced that it is considering launching legal proceedings against New Zealand Customs over a dispute regarding the taxation of slop oil.

Customs New Zealand has recently claimed as much as NZD 71 million of taxes could be owed by Z Energy, BP, Mobil and Chevron, due to the fact that all four companies co-mingle slop oil in the petrol products they sell in the country.

Currently, the majority of the oil imported into the country is refined at the Marsden Point oil refinery near Whangarei, and the refined product is then sent to the Wiri Oil Service Limited terminal in Auckland via the Refinery to Auckland pipeline.

The pipeline handles petrol, diesel, and jet fuel, and, as a result, a small amount of the products are mixed and become unusable until they are refined and co-mingled into petrol sold to consumers.

New Zealand Customs is now claiming that the extra petrol resulting from the co-mingling of fuel should be levied with excise duties, and is seeking to collect such back taxes dating from 1986.

However, Z Energy is claiming that application such duties is not justified as excise duties are collected based on the petrol leaving the refinery, and applying duties to the use of slop would be equivalent to introducing another collection point.