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The Optimal Petroleum Fiscal Regime for Ghana: An Analysis of Available Alternatives

Author

Listed:
  • Dankwa Kankam

    (SDC Finance and Leasing Company ltd, Brokerage Services ltd.,Accra, Ghana.)

  • Ishmael Ackah

    (Department of Economics and Finance,Portsmouth Business School,University of Portsmouth, UK.)

Abstract

Ghana became an oil producing country in December 2010. This development renewed the expectation of the citizenry as to the revenue that will accrue to the state and its direct effect on standard of living. The purpose of this study was to evaluate the Ghanaian upstream petroleum fiscal regime, including state and investor shares, and to compare it with petroleum fiscal regimes of some six other oil producing African countries. The qualitative assessment compared the regime on general taxation and petroleum taxation in particular. The traditional Discounted Cash Flow (DCF) method was used in the quantitative assessment of the regimes. Out of the seven regimes used in the quantitative analysis, the Ghanaian regime ranks sixth in terms of government take. It also ranks second with 31 months investor payback period based on post-tax discounted cash flow. Though the Ghanaian fiscal regime appears to be progressive; thin capitalisation, royaltyrate, and cost recovery limits withholding taxes on interest. Therefore tying of additional oil entitlements to profits are recommended in future reviews of the Ghanaian fiscal regime. It appears from the study that the Ghanaian regime is not optimal and the recommendation provided would help improve upon it.

Suggested Citation

  • Dankwa Kankam & Ishmael Ackah, 2014. "The Optimal Petroleum Fiscal Regime for Ghana: An Analysis of Available Alternatives," International Journal of Energy Economics and Policy, Econjournals, vol. 4(3), pages 400-410.
    • Handle: RePEc:eco:journ2:2014-03-9
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    References listed on IDEAS

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    3. Robert D. Cairns, 1985. "Reform of Exhaustible Resource Taxation," Canadian Public Policy, University of Toronto Press, vol. 11(4), pages 649-658, December.
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    Cited by:

    1. Ernest Aryeetey & Ishmael Ackah, 2018. "The boom, the bust, and the dynamics of oil resource management in Ghana," WIDER Working Paper Series wp-2018-89, World Institute for Development Economic Research (UNU-WIDER).
    2. Banda, Webby, 2023. "A system dynamics model for assessing the impact of fiscal regimes on mining projects," Resources Policy, Elsevier, vol. 81(C).
    3. Ernest Aryeetey & Ishmael Ackah, 2018. "The boom, the bust, and the dynamics of oil resource management in Ghana," WIDER Working Paper Series 89, World Institute for Development Economic Research (UNU-WIDER).
    4. Osei-Kojo, Alex & Bobbie, Lord Horlali & Andrews, Nathan & Wilkerson, Alex Dylan & Adams, Ellis Adjei & Leech, Nancy, 2024. "The state of research on Ghana’s oil and gas resources: Themes and future directions," Resources Policy, Elsevier, vol. 88(C).
    5. Emmanuel E. Okoro & Joseph Echendu & Lawrence U. Okoye & Samuel E. Sanni & Kale B. Orodu & Rita I. Okoro, 2021. "Nigeria Deep Offshore Inland Basin Production Sharing Contract Acts: Evaluating Contractor s Take," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 97-106.

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    Keywords

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    JEL classification:

    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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