Chevron Disputes Magistrate's Interpretation Regarding IRS Inquiry
CHEVRON DISPUTES MAGISTRATE'S
REGARDING IRS INQUIRY
INTO INDONESIAN TAXES
SAN FRANCISCO, Jan. 29, 1996 -- Chevron today strongly disputed a magistrate's interpretation that documents in an Indonesian tax case indicate the possibility that "crimes or frauds" may have been committed.
"We have not and would not engage in any illegal or unethical activity to evade taxes in the United States or any other jurisdiction," said Bruce Marsh, Chevron's General Tax Counsel.
"I can only conclude that the magistrate misunderstood these documents," Marsh said. "It is hard to understand how anyone could review them and believe they had anything at all to do with criminal activity. I'm convinced that any knowledgeable reader would conclude these documents involve normal communications consistent with regular business activities."
Marsh added the company believes it has paid all taxes due on its Indonesian operations and anticipates no further tax liability in connection with the IRS inquiry into the 1983 to 1987 tax years.
The inquiry involves about $1.4 billion in taxes that Chevron paid to the Indonesian government between 1983 and 1987. For many years, the IRS agreed with an understanding worked out with the U.S. Treasury and State departments, the government of Indonesia and the oil industry that these taxes and others paid to foreign governments could be taken as a credit against U.S. taxes due on the foreign income.
In 1993, however, the IRS began an attempt to reinterpret this long-standing agreement. Chevron and other U.S. oil companies are challenging the IRS's position.
In the course of its inquiry, the IRS asked for documents regarding Chevron negotiations with the government of Indonesia and Pertamina, the Indonesian national oil company. Chevron believes these documents are protected by the attorney-client privilege. The Oakland, Calif., magistrate was asked to rule on this position.
The magistrate did agree with Chevron's position that all documents were privileged, but his report mentioned possible criminal activity, thus venturing into an area never addressed by the IRS nor supported by an understanding of the issues, Marsh said.
"We plan to work with the IRS to eliminate any question about our honesty and integrity," he said. "I believe the IRS will agree that there is no issue regarding improper behavior."
Updated: January 1996