Government could lose up to $112 million (K82 billion) in revenue if the country commences oil production under the current production sharing agreements (PSAs) with foreign companies, a new Oxfam report has stated. The analysis of the fiscal terms in the oil contracts done by Oxfam, through a consortium of international economic and oil industry consultants, is based on assumptions on provisions in the contracts which allow companies to pay less taxes as the oil blocks make more profit.  As a consequence, the report says the country could lose between $112 million and $562 million (about K375 billion) for reductions in 2 percent and 10 percent corporate taxes reductions for a 30-year period in which the country could export oil as after two years of production, current oil contracts allow companies to negotiate for reduction of the tax rates.

Additionally, on profit sharing, the contracts have two conflicting fiscal principles in its paragraphs, namely sliding shares and R-factor which would end up depriving government up to $363 million (about K265 billion) for project as sliding scales is based on sharing revenue while R-factor is based on cumulative revenue to cumulative costs. The report subsequently urges government to strengthen its capacity to undertake an economic analysis of the fiscal terms contained in the existing and future production sharing contracts. The report was presented to Parliamentary Committee on Natural Resources on Wednesday in Lilongwe.