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Rent Taxation for Nonrenewable Resources

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  • Lund, Diderik

    ()
    (Dept. of Economics, University of Oslo)

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 which 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 which cast doubt upon the relevance of studies which 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 1980's are promising, but still not in widespread use. Some more specific topics covered in this review are optimal risk sharing between companies and gov- ernments, time consistency and scal stability, the relationship between taxes and discount rates, and transfer pricing.

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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 01/2009.

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Length: 30 pages
Date of creation: 01 Jan 2009
Date of revision:
Publication status: Published in Annual Review of Resource Economics, 2009, pages 287-307.
Handle: RePEc:hhs:osloec:2009_001

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Keywords: Natural resources; rent tax; royalty; oil; minerals; energy;

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References

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  1. 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.
  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. 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.
  5. 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.
  6. 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.
  7. 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.
  8. Lund, Diderik, 2002. "Rent taxation when cost monitoring is imperfect," Resource and Energy Economics, Elsevier, vol. 24(3), pages 211-228, June.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
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Cited by:
  1. 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.
  2. Frestad, Dennis, 2010. "Corporate hedging under a resource rent tax regime," Energy Economics, Elsevier, vol. 32(2), pages 458-468, March.
  3. Dobra, John & Dobra, Matt, 2013. "State mineral production taxes and mining law reform," Resources Policy, Elsevier, vol. 38(2), pages 162-168.

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