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Rent Taxes on Norwegian Hydropower Generation

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  • Eirik S. Amundsen
  • Christian Andersen
  • Jan Gaute Sannarnes
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    Abstract

    In Norway, two obstacles to the introduction of a hydro rent tax are about to vanish, the old accounting system for public utilities and the system of administered non-rent prices. The tax authorities are now searching for a viable rent tax system. In this paper we consider detailed effects of six tax systems on realistically modelled marginal and highly profitable power plants. In addition to the existing "percentage system" we examine the ordinary corporate tax system, a special electricity income tax, a higher rate of proportional income tax, an excise tax and a resource rent tax. These systems are compared and evaluated with respect to neutrality, sensitivity to the amount of economic rent generated in a plant, cost-consciousness, stability of tax rates, stability of taxes paid, uncertainty of tax revenues and administrative costs. We conclude that the existing Norwegian tax system for electricity generation is not suited for taxing hydro rent since it seriously violates several of these criteria. The existing system ought to be replaced by a resource rent tax either as a pure system or in combination with a corporate income tax system.

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    Bibliographic Info

    Article provided by International Association for Energy Economics in its journal The Energy Journal.

    Volume (Year): Volume 13 (1992)
    Issue (Month): Number 1 ()
    Pages: 97-116

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    Handle: RePEc:aen:journl:1992v13-01-a06

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    Cited by:
    1. Massimo Filippini & Silvia Banfi, 2009. "Resource Rent Taxation and Benchmarking – A New Perspective for the Swiss Hydropower Sector," CEPE Working paper series 09-67, CEPE Center for Energy Policy and Economics, ETH Zurich.
    2. Cornelia Luchsinger & Adrian Müller, 2003. "Incentive Compatible Extraction of Natural Resource Rent," CEPE Working paper series 03-21, CEPE Center for Energy Policy and Economics, ETH Zurich.
    3. Smith, James L., 2013. "Issues in extractive resource taxation: A review of research methods and models," Resources Policy, Elsevier, vol. 38(3), pages 320-331.
    4. Banfi, Silvia & Filippini, Massimo & Mueller, Adrian, 2005. "An estimation of the Swiss hydropower rent," Energy Policy, Elsevier, vol. 33(7), pages 927-937, May.
    5. Muller, Adrian, 2006. "How to Make the Clean Development Mechanism Sustainable - The Potential of Rent Extraction," Working Papers in Economics 214, University of Gothenburg, Department of Economics.

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