New tax regime to boost Aramco IPO value

March 28, 2017

Jeddah, Mar 28: Saudi Arabia approved Monday a new tax regime for oil and natural gas producers in the Kingdom, which will boost Saudi Aramco’s valuation as it plans to sell shares in its initial public offering (IPO) next year.

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Under the new regime, hydrocarbon companies in Saudi Arabia will be taxed depending on their capital, according to a royal decree issued Monday and posted on the website of the Saudi Press Agency (SPA).

Companies with capital of more than SR375 billion ($100 billion) will pay 50 percent income tax. Those with capital between SR300 billion and SR375 billion will pay 65 percent tax.

Companies with capital between SR225 billion and SR300 billion will pay 75 percent, and those with capital below SR225 billion 85 percent.

Saudi Aramco will see its income tax rate fall from 85 percent to 50 percent, CEO Amin Nasser said Monday, adding that the new rates will put the company in line with international benchmarks. The new rate is effective retroactively from Jan. 1.

Saudi Arabia aims to sell as much as 5 percent of the company late next year in an IPO. With the drop in its tax rates, future investors who are interested in buying Saudi Aramco shares will see more cash flow.

This will be positive news for the company’s valuation, which the government estimates to be at least $2 trillion.

“The 50 percent tax rate will be very lucrative to investors who should be gearing up for its privatization,” said John Sfakianakis, director of economic research at the Gulf Research Center Foundation in Riyadh.

“This is one of many steps that will begin a process of investor-friendly initiatives that will help in wetting appetites,” he added.

“The royal decree falls in line with an earlier promise that Saudi Arabia will reduce the overall tax rate paid by its national oil company to make its 2018 IPO — potentially one of the largest in history — more appealing to investors.”

But the fall in tax rates does not mean the government will lose income. “Any reduction in tax revenues arising from this Royal Order is replaced by stable dividend payments and other sources of revenue from hydrocarbon producers to the government,” Energy Minister and Aramco Chairman Khalid Al-Falih said in a statement.

“It is very important to make it clear that the hydrocarbon resources of Saudi Arabia remain sovereign.”

Saudi Aramco welcomed the introduction of the new tax regime as another positive step in diversifying the Kingdom’s economy.

“We thank… King Salman… for the Royal Order,” said Nasser. “The new tax rate will bring Saudi Aramco in line with international benchmarks.”

Nasser said the company will continue to make a critical contribution to the diversification and growth of the Saudi economy in line with Vision 2030.

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News Network
May 20,2024

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Iran's state media today said that there was "no sign" of life among passengers of the helicopter which was carrying President Ebrahim Raisi, Foreign Minister Hossein Amir-Abdollahian, and other officials.

Here are 10 points on this tragedy

1.    "Upon finding the helicopter, there was no sign of the helicopter passengers being alive as of yet," state TV reported. The incident occurred during President Raisi's return flight to the Iranian city Tabriz after he and Azerbaijani President Ilham Aliyev inaugurated the Qiz Qalasi Dam on their shared border. 

2.    The helicopter, carrying President Raisi, Foreign Minister Hossein Amir-Abdollahian, and other officials, lost contact approximately 30 minutes into the flight. This sparked immediate concerns and a massive search and rescue operation.

3.    Initial reports from Iran's state media described the situation as an "accident." Iran's Deputy President for Executive Affairs Mohsen Mansouri said that two members of the president's entourage had contacted rescue teams, suggesting that the incident might not have been catastrophic. Mansouri added that the Ministry of Communications had managed to narrow down the potential crash site to within a two-kilometre radius.

4.    Iranian state media reported that Deputy Foreign Minister for Economic Diplomacy Mehdi Safari claimed that the Tabriz Friday prayer leader had managed to speak with President Raisi, 63, via phone from the downed helicopter. "Mehdi Safari, who was present in one of the three helicopters carrying President Raisi's entourage, said the Tabriz Friday prayer leader had made a phone call to the president from inside the crashed copter," the report reads. 

5.    Iran's Supreme Leader Ayatollah Ali Khamenei urged calm and assured that there would be no disruption in the country's governance. "We hope that Almighty God will bring our dear president and his companions back in full health into the arms of the nation," he stated in a televised address.

6.    The search effort has been extensive, with more than 60 rescue teams, including army, Revolutionary Guard forces, and police units, scouring the foggy, mountainous terrain. The harsh weather conditions and heavy fog have significantly hampered these efforts. Iran's Red Crescent chief, Pirhossein Koolivand, said the team has detected a "smell of fuel" in one area, which rescue teams are now converging on.

7.    The international community has expressed concern and offered assistance. Neighbouring countries and organisations, including Iraq, Kuwait, Qatar, Saudi Arabia, Syria, Russia, Turkey, and the European Union, have pledged support. The EU has even activated its rapid response mapping service to aid in the search efforts.

8.    Prime Minister Narendra Modi on Sunday expressed his "deep concern" with a post on social media. "Deeply concerned by reports regarding President Raisi's helicopter flight today. We stand in solidarity with the Iranian people in this hour of distress, and pray for well being of the President and his entourage," he said in a post on X.

9.    Iranian Foreign Ministry spokesman Nasser Kanani conveyed gratitude for the international solidarity and offers of help. US President Joe Biden has been briefed on the situation, with a State Department spokesman confirming they are closely monitoring developments.

10.    This incident follows a period of heightened regional tensions, particularly in light of the Gaza conflict and Iran's recent escalations with Israel. President Raisi, who has been in office since 2021, has pledged Iran's steadfast support for Palestine, a stance reiterated during his recent dam inauguration speech.

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News Network
May 7,2024

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The Israeli military says it has taken full control of the Rafah crossing, which borders Egypt.

Israeli tanks took over the crossing after advancing during the night following heavy bombardment of residential areas.

The military said the crossing is now disconnected from the Salah a-Din road in eastern Rafah, which was seized before.

Tel Aviv said it would continue the operation in Rafah even after the Palestinian resistance movement Hamas said it had agreed to a proposal on ceasefire in Gaza put forward by Qatari and Egyptian mediators.

Earlier, Israeli military aircraft heavily bombed Rafah accompanied with ground advances shortly after Hamas said it had accepted the ceasefire proposal.

The official Palestinian news agency Wafa and Egyptian media said Israeli military vehicles advanced towards the Palestinian side of the Rafah crossing with Egypt, as well as the Karem Shalom crossing with the Israeli-occupied territories.

A Palestinian security official and an Egyptian authority have told the Associated Press news agency that Israeli tanks have entered Rafah, reaching as close as 200 meters from Rafah’s border crossing with neighboring Egypt.

The Israeli military has said it was conducting “targeted strikes” against Hamas in eastern Rafah.

Israeli prime minister Benjamin Netanyahu's office has also said "Israel is continuing the operation in Rafah to exert military pressure on Hamas" in order to advance the release of captives and what it called "the other objectives of the war."

In the meantime, it described the proposal on ceasefire as "far from Israel's essential demands," but added that it would send negotiators for talks "to exhaust the potential for arriving at an agreement."

The military strikes on Rafah came ahead of talks in Egypt on Tuesday aimed at sealing a truce proposal accepted by Hamas, which was put forward by Qatari and Egyptian mediators. 

According to a copy of the proposal, there will be three phases to ending Israel’s onslaught against Gaza.

The first phase calls for a complete withdrawal of Israeli troops from the Netzarim corridor and the return of displaced Palestinians to their homes. The second phase involves an announcement of a permanent cessation of military operations. In the last phase, there would be a complete end to the blockade of the Gaza Strip. 

In return, Israel would be required to release an unspecified number of Palestinian prisoners, withdraw its troops from certain regions of the Gaza Strip, and allow Palestinians to travel from the south of the coastal sliver to the north.

About 1.5 million Palestinians are sheltering in Rafah, once designated a “safe zone” by the Israeli military. Palestinians are now struggling to evacuate the city, after the Israeli military dropped leaflets ordering them to leave as a large-scale assault on the city is planned.

UN Secretary General Antonio Guterres has said that a ground invasion of Rafah would be “intolerable” and called on Israel and Hamas “to go an extra mile” to reach a truce deal.

“This is an opportunity that cannot be missed, and a ground invasion in Rafah would be intolerable because of its devastating humanitarian consequences, and because of its destabilizing impact in the region,” Guterres told reporters on Monday ahead of a meeting with Italian President Sergio Mattarella in New York.

Jordanian Foreign Minister Ayman Safadi has also warned that Israel is “jeopardizing the deal by bombing Rafah.”

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News Network
May 19,2024

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A senior UN official says around 800,000 people have been "forced to flee" Rafah in the southern Gaza Strip since the Israeli regime began carrying out ground incursions into the refugee-packed city from various axes.

Philippe Lazzarini, the head of UNRWA, the UN agency for Palestinian refugees, made the remarks in a post on X, former Twitter, on Saturday.

"Nearly half of the population of Rafah or 800,000 people are on the road having been forced to flee since the Israeli forces started the military operation in the area on May 6," he said.

The invasion of the city came amid a genocidal war against Gaza by the regime that has so far claimed the lives of more than 35,300 Palestinians.

Around 1.5 million Palestinians had taken refuge in Rafah prior to the incursions, having fled there from the ravages of the war that began following a retaliatory operation against the occupied territories by Gaza’s resistance groups.

The Gazans, who have now left the city, have fled to "the middle areas and [the southern Gaza city of] Khan Younis, including to destroyed buildings," Lazzarini said.

Al-Mawasi, a 14-square-kilometer town on the coast, as well as the central city of Deir el-Balah, were "crammed" with recently displaced people, he added.

"Every time, they are forced to leave behind the few belongings they have ....Every time, they have to start from scratch, all over again."

The Israeli military has, meanwhile, seized the Rafah crossing in southern Gaza, which borders Egypt and serves as the main point of entry for aid supplies, including fuel, into Palestinian territory.

The move came as part of an all-out siege that the regime has been enforcing against the entire Gaza simultaneously with the war.

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