UNCLOS stipulates modest fees on resource extraction industries but does not represent new taxing authority
Myth: The convention gives the United Nations its first opportunity to levy taxes.
False--the convention does not provide for or authorize taxation of individuals or corporations. It does include modest revenue sharing provisions for oil and gas activities on the continental shelf beyond 200 miles after the first five years of production and certain fees for deep seabed mining operations. The oil and gas fees are less than the royalties paid to foreign countries for drilling off their coasts and none of the revenues go to the United Nations. These de minimus revenues, which average between two and four percent over the projected life of a well, were a small price to pay for enlarging the U.S. continental shelf by 15 percent, an area larger than the state of California. This is one of the reasons the U.S. oil and gas industry so strongly supports the convention. With respect to deep seabed mining, U.S. companies that apply for deep seabed mining licenses would pay their fees directly to the ISA; no implementing legislation would be necessary. United States consent-that is, its veto would be applicable-would be required for any transfer of such revenues. Yet because the United States is a non-party, U.S. companies currently lack the ability to engage in deep seabed mining under domestic authority alone. By ratifying the treaty, our firms will have this ability which will open up new revenue opportunities when deep seabed mining becomes economically viable. The alternative is no deep seabed mining for U.S. firms, except through other nations that are convention parties. When the Interior Department charges royalties to U.S. oil companies for the development of oil and gas from our continental shelf, it is not exercising a "taxing power," rather it is selling access to an asset. Similarly, royalties paid for these rights are not a "tax" on U.S. taxpayers any more than such royalties paid by U.S. miners to Chile or Indonesia to mine resources there are such a "tax." Perhaps most importantly, until the United States accedes to the convention, it will not be able to exercise its veto over distribution of revenues from every other nation in the world generated by these provisions. And when we do accede, we not only have veto rights over distribution of revenues from U.S. mines, but from all other seabed mines as well. As such, these provisions greatly expand U.S. influence over financial aid decisions.
"The Senate should give immediate advice and consent to the UN Convention on the Law of the Sea: why the critics are wrong.
." Journal of International Affairs
. Vol. 59, No. 1 (Fall/Winter 2005) [ More (18 quotes) ]
Opponents argue that by ratifying UNCLOS, the United Nations would be given the first opportunity to tax U.S. citizens. However, this is a misunderstanding of the royalties structure within UNCLOS. The International Seabed Authority requires royalty payments from all companies engaged in seabed mining in areas that do not belong to any country and are therefore under the management of the ISA. These payments are a small fraction of the revenue and similar to payments U.S. companies already pay around the world to governments for resource concessions.