EDITORIAL
Chevron tax charges not easily abandoned

There are, we suppose, a variety of legitimate reasons why the state could decide not to take ChevronTexaco Corp. to court over allegations of tax evasion.

That decision will come soon, state officials say.

But the Lingle administration, should it decide not to proceed, must recognize that decision will be viewed with an extra measure of skepticism.

That's partly because of the seriousness of the allegations against Chevron. And it's partly because Gov. Linda Lingle, as a candidate, promised to make life in Hawai'i much more comfortable for business, and because Chevron has been a source of political and financial support for Lingle.

And that's why we get a shrinking feeling when we learn that the attorney general's office plans to seek Chevron's help in crafting its explanation on whether to proceed with a lawsuit. Surely the state wouldn't be asking the defendants to explain why they were being sued.

This would mark the second time the state has taken Chevron to court. In 1998, it filed an antitrust lawsuit against divisions of Chevron, Texaco and other gasoline wholesalers. The state sought $2 billion for alleged price-fixing. The companies, admitting no wrongdoing, settled for a total of $35 million. The settlement had no effect on the prices at the pump.

But testimony emerging from the antitrust lawsuit demonstrated that Hawai'i wholesalers set prices high enough to generate some of the highest profits in the nation because there's nothing to impede them.

That revelation led to a state law, taking effect next year, to regulate gasoline prices. That complex law is strongly opposed by Hawai'i's oil companies and, in last year's campaign, Lingle promised to seek its repeal.

It's within that oil-friendly atmosphere that the Lingle administration is now contemplating a second lawsuit charging that Chevron and Texaco, companies now merged, operated a complex scheme to avoid paying billions in U.S. and state taxes, mostly in Hawai'i and California.

The companies did this, according to two accounting professors, by buying Indonesian oil at an inflated price, overstating deductions on U.S. income tax returns, and then correcting the overcharge by accepting free oil.

The professors reckon the 30-year total of U.S. taxes thus evaded was $3.35 billion, and the amount still owing Hawai'i at a little more than a half-billion dollars. In 1994, Chevron filed amended federal tax returns with additional payments of some $675 million.

A law firm, chosen to pursue this case on a contingency basis, has submitted its recommendations to the attorney general's office, and the decision whether to proceed will soon be made.

It's clear that these matters are far too serious to abandon the case simply because it was another administration's idea, or because it will be seen in many quarters as "anti-business."

Too many worthy responsibilities of state government are struggling for lack of tax revenues. If the state can prove that a company has failed to carry its fair share, that company must pay the price.