Indirect Verification of Allowable Capital Expenditure Claims in Extractive Industries A Two-Pathway Triangulation Framework and Its Evidentiary Standing in Tax Litigation
Every dollar a project genuinely spends leaves a trace in records whose custodian is not the taxpayer.
Extractive capital claims exceed USD 10–20 billion per project, yet the invoices sit offshore and are never produced. ACE-TRIANGULATE rebuilds the supportable cost from eight independent evidence streams — and writes every finding to a standard that survives objection and appeal.
The loudest cost is the one nobody can verify
The largest single deduction in extractive taxation is capital expenditure. For an LNG development the allowable-capital-expenditure pool commonly exceeds USD 10–20 billion, and a 10–15% overstatement displaces hundreds of millions of dollars of tax.
The administration's difficulty is evidential, not conceptual. Costs are incurred offshore, through affiliated EPC contractors, under contracts the administration never sees. Requests for source documents meet partial production, delay, or litigation over the scope of information powers. A conventional books-and-records audit presupposes access to the taxpayer's ledger — so when access is refused the audit does not conclude adversely, it simply does not conclude, and the claim stands by default.
Every dollar a project genuinely spends leaves at least one trace in records whose custodian is not the taxpayer.
Equipment crosses a wharf and enters the customs system. Offshore payments clear the banking system and appear in exchange-control records. Withholding tax on foreign contractors is remitted to the administration itself. Workers require permits. Construction is visible from orbit. ACE-TRIANGULATE assembles those traces into a supportable-cost corridor — without the taxpayer's cooperation.
Headline result
On a calibrated synthetic reference case — a 5.6 Mtpa LNG development claiming USD 15.2 billion of allowable capital expenditure — the full eight-stream determination supports USD 12,645 million, disallowing USD 2,555 million and yielding a primary tax shortfall near USD 585 million.
The screening estimator, using only administratively trivial inputs, independently bounds the claim at USD 12,746 million — within four per cent of the full determination and directionally identical on grade. That supports a triage protocol: grade on day one, mature to an assessment-grade determination as evidence accumulates.
Eight independent evidence streams
Each stream is either already inside government or compellable from a third party under existing information powers. None requires the taxpayer's cooperation. Every stream imposes an independent bound on the claim.
Two pathways, bound by a coverage rule
A case computes under Pathway B from inception and is recommended for Pathway A once the claimed schedule plus at least three evidence streams are loaded. Data difficulty can delay an upgrade but can never block a determination.
The full eight-stream determination
Synthesises a supportable-cost corridor per category from all eight streams, excises above-band affiliate margin, and produces an assessment-grade quantum written to an evidentiary standard.
The screening estimator
Bounds total project cost from administratively trivial inputs — figures already inside the administration plus facts the taxpayer's own partners and regulators publish. Grades on day one; degrades gracefully.
Claim within corridor — no interagency escalation warranted.
Escalate: interagency requests carry diplomatic cost, so are made only for claims already screening high.
Full Pathway A quantum, matured as streams arrive; every transition auditable in the case file.
Triage before trench warfare
The screening grade rationalises escalation and the case file records when each stream arrived and how the determination moved — which itself becomes evidence of the administration's methodical conduct if the matter proceeds to litigation.
A number that cannot survive objection and appeal is not revenue
Each output is designed to satisfy the requirements Commonwealth jurisprudence imposes on best-judgement assessments. The framework ships a litigation evidence-pack protocol built to survive the challenges taxpayers can be expected to mount.
Source attestation
Each stream exhibited with its custodian and provenance, generated as a by-product of the audit.
Deterministic recomputation
The computation reproduces exactly from disclosed inputs — a worked recomputation any party can rerun.
Disclosed assumptions
Methodology paper, calibration annex, and every parameter disclosed rather than buried.
Graduated stringency
P25–P75–P90 ceilings and margin caps let the administration pitch the assessment defensibly.
The method travels
The framework was built against one of the largest LNG projects in the developing world and fitted to actual fiscal terms — the PNG LNG Gas Agreement, including its net-wellhead royalty base and agreed depreciation schedule. Mozambique, Tanzania, Senegal, and Mauritania are about to face the same claims.
The reference LNG pool
5.6 Mtpa development, 34 wells; the deduction the tax base rests on.
Excised on the evidence
Including USD 672m of above-band affiliate margin; supportable cost USD 12,645m.
Primary shortfall
Run through the declining-balance schedule against the project revenue profile.
Limitations
All quantitative results are simulation-based on a calibrated synthetic reference case; no real taxpayer data is used. Each stream's bound depends on calibration duties the administration must discharge — benchmark selection, remoteness adjustment, and margin-band choice among them. The streams bound the claim; they do not reconstruct the taxpayer's actual ledger, and a cooperative production of genuine source documents remains the higher-quality path where it is available.
Selected references: Daniel, Keen & McPherson (2010) · OECD (2022) · Benford (1938) · Nigrini (2012) · IMF TADAT framework · PNG Income Tax Act 1959, Division 10 · PNG LNG Gas Agreement.
Reproducibility. Maitras.ai working paper MWP-2026-02. A calibrated synthetic reference case; no live administrative or taxpayer data. Views are the author's and do not represent any revenue administration.
Reference Paper: MCWP-2026-01 · DOI: 10.5281/zenodo.21817587