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Rent Taxation for Nonrenewable Resources

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  • Diderik Lund

    ()
    (Department of Economics, University of Oslo, NO–0317 Oslo, Norway)

Abstract

The literature on taxation of rents from nonrenewable resources uses different theoretical assumptions and methods and a variety of empirical observations to arrive at widely diverging conclusions. Many studies use models and methods that disregard uncertainty, investigating distortionary effects of different taxes on whether, when, and how to explore for, develop, and operate resource deposits. Introducing uncertainty into the analysis opens a range of challenges and leads to results that cast doubt on the relevance of studies that neglect uncertainty. There are, however, several ways to analyze uncertainty regarding companies' behavior, resource price processes, and diversification opportunities, all with different implications for taxation. Methods developed in financial economics since the 1980s, though promising, are still not in widespread use. Additional topics covered in this review are optimal risk sharing between companies and governments, time consistency and fiscal stability, the relationship between taxes and discount rates, tax competition, and transfer pricing.

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File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev.resource.050708.144216
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Bibliographic Info

Article provided by Annual Reviews in its journal Annual Review of Resource Economics.

Volume (Year): 1 (2009)
Issue (Month): 1 (09)
Pages: 287-307

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Handle: RePEc:anr:reseco:v:1:y:2009:p:287-307

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Related research

Keywords: natural resources; rent tax; royalty; oil; minerals; energy;

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References

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  1. Sumner, M T, 1978. "Progressive Taxation of Natural Resource Rents," The Manchester School of Economic & Social Studies, University of Manchester, vol. 46(1), pages 1-16, March.
  2. Robin Boadway & Neil Bruce, 1982. "A General Proposition on the Design of a Neutral Business Tax," Working Papers 461, Queen's University, Department of Economics.
  3. Mackie-Mason, Jeffrey K., 1990. "Some nonlinear tax effects on asset values and investment decisions under uncertainty," Journal of Public Economics, Elsevier, vol. 42(3), pages 301-327, August.
  4. Gaudet, G. & Lasserre, P., 1984. "Capital Income Taxation, Depletion, Allowances and Non-Renewable Resource Extraction," Cahiers de recherche 8430, Universite de Montreal, Departement de sciences economiques.
  5. Lund Diderik, 1993. "The Lognormal Diffusion Is Hardly an Equilibrium Price Process for Exhaustible Resources," Journal of Environmental Economics and Management, Elsevier, vol. 25(3), pages 235-241, November.
  6. Lund, Diderik, 2002. "Rent taxation when cost monitoring is imperfect," Resource and Energy Economics, Elsevier, vol. 24(3), pages 211-228, June.
  7. Groth, Christian & Schou, Poul, 2007. "Growth and non-renewable resources: The different roles of capital and resource taxes," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 80-98, January.
  8. Charles R. Blitzer & Donald R. Lessard & James L. Paddock, 1984. "Risk-Bearing and the Choice of Contract Forms for Oil Exploration and Development," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-28.
  9. Zhang, Lei, 1997. "Neutrality and Efficiency of Petroleum Revenue Tax: A Theoretical Assessment," Economic Journal, Royal Economic Society, vol. 107(443), pages 1106-20, July.
  10. Paul G. Bradley, 1998. "On the Use of Modern Asset Pricing for Comparing Alternative Royalty Systems for Petroleum Development Projects," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 47-81.
  11. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
  12. Margaret E. Slade & Henry Thille, 2009. "Whither Hotelling: Tests of the Theory of Exhaustible Resources," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 239-259, 09.
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Citations

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Cited by:
  1. Frestad, Dennis, 2010. "Corporate hedging under a resource rent tax regime," Energy Economics, Elsevier, vol. 32(2), pages 458-468, March.
  2. John Dobra & Matt Dobra, 2011. "State Mineral Production Taxes and Mining Law Reform," Working Papers 11-001, University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics.
  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.

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