The current escalating conflict between Albania’s government and the country’s largest foreign investor is a lose-lose situation for both sides and should be brought to a fair resolution as soon as possible
TIRANA TIMES EDITORIAL
This week, the Albanian government and the country’s largest foreign investor, Canada’s Bankers Petroleum, have reached a low point in their conflict over a tax bill worth $75 million, including assessed interest and penalties from the $57 million the Albanian government says the oil company owes.
Bankers says it has reinvested the money into its operations and thus does not have to pay taxes on it. But the Albanian government has frozen the company’s bank accounts in Albania until Bankers agrees to pay up and has refused to comply with a ruling of the International Court of Arbitration of the International Chamber of Commerce to open up the accounts until the arbitration court gives a final ruling on the tax dispute.
In return, the company has said it might have to scale or shut down its operations in Albania, angering the government enough to declare “that Albania’s national assets are a property of all Albanians and cannot be misused or used as threats to the country.”
Depending on who you listen to, the conflict is either about protecting foreign investments or about making sure the Albanian state budget gets its fair share from oil revenue through taxes.
Yet, if the conflict is allowed to escalate further, Albania’s government and the country’s largest foreign investor face a lose-lose situation. To avoid this, both sides should work for an amicable and fair resolution as soon as possible.
The government must reach a delicate balance between not appearing to be hostile to a major foreign investor and making sure that a fair tax bill is paid.
We won’t get into the details of the conflict. Each side has presented its points about why it believes it is in the right. Both sides now have highly-paid and highly-qualified international lawyers ready to fight. Both sides however have more to lose than to gain from the loggerhead where they find themselves.
Bankers, a publicly traded company, could find itself losing market value if investors perceive that its foothold in its largest oil production area is in danger thanks to a conflict with regulatory bodies.
The tax bill in question is a drop in the bucket in terms of the revenues the company gets from Albania. But it comes at a time when both the company and Albania are hurting from low global international oil prices.
The Albanian government too has much to lose if the conflict escalates to the point of Bankers leave the country. It would be the second time in just a few years that a major foreign company leaves the country over conflicts with state entities. While CEZ and Bankers are two very different cases, they could be perceived as a trend by future potential investors, which can start drawing the wrong conclusions about how the Albanian government deals with large foreign investors.
Let’s face it, Albania’s market is small, and it is hard to attract major investors from abroad. So perceptions are paramount. That said, we are not advocating that the government simply lay down the carpet for foreign companies without keeping the public interest in mind. If Bankers is overreaching into gray areas with tax-avoidance schemes, the government’s case also needs serious consideration.
At the end of the day, it is best that the company and the government solve this problem as fast as they can and in an amicable way. That solution would be good for Albania — and for Bankers too.
