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Louisiana Loses ‘Millions’ in Oil Extraction Tax Glitch

Procedural inadequacies at the Department of Revenue have reportedly cost the state of Louisiana millions of dollars in oil and gas extraction taxes between 2009 and 2012, according to the results of an audit released on 2 December.

Tax revenues from oil and gas extraction are one of the state’s biggest sources of operational financing and auditors estimate that Louisiana has lost millions in potential revenue due to severance tax inaccuracies.

"Because severance taxes comprise approximately 10 percent of the state's general fund revenues each year, it is important for LDR [Louisiana Department of Revenue] to ensure these payments are accurate and timely," the auditor wrote in an 11-page report.

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The Auditor's Office found several problems with the state's monitoring and refunding of the severance tax, which is levied on natural resources removed from the ground or water. Auditors reviewed severance tax payments from 2009 through 2012.

"We don't know. We don't know what the true [amount of money lost] is," Legislative Auditor Daryl Purpera commented on the severance taxes that went unpaid.

According to the report, in 2010, the LDR stopped using an automated program called “GenTax”, which pinged companies that weren’t filing severance tax returns, and other avenues for keeping track of such filings are too limited to be accurate.

When they flipped the switch on “GenTax,” they may have lost out on the collection of millions of dollars—a theory supported by auditors’ claims that that revenue department had identified millions of dollars in unpaid taxes before shutting down the program.

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According to the audit, “the department's review of severance tax refund requests also is insufficient, allowing companies to get more refunded to them than what is owed.”

Steps have been taken to remedy the problem, which the oil and gas industry says is being exaggerated.

Natalie Howell, undersecretary for the revenue department, said the program has been redesigned and will be up and running before the end of December, and that the department was also devising an automated method for determining whether companies' self-reported data matches market rates.

By. Joao Peixe of Oilprice.com

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