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Fiscal Systems for Hydrocarbons : Design Issues

Author

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  • Silvana Tordo

Abstract

Although host governments and the investors may share one common objective-the desire for the project to generate high levels of revenue-their other goals are not entirely aligned. Host governments aim to maximize the rent for their country over time, while achieving other development and socioeconomic objectives. Investors' aim is to ensure that the return on investment is consistent with the risk associated with the project, and with their corporations' strategic objectives. To reconcile these often conflicting objectives, more and more countries rely on transparent institutional arrangements and flexible, neutral fiscal regimes. This paper examines the key elements of the legal and fiscal frameworks utilized in the petroleum sector and aims to outline desirable features that should be considered in the design of fiscal policy with the objective of optimizing the host government's benefits, taking into account the effect that this would have on the private sector's investment. Chapters 2 and 3 provide background material on, respectively, the stages of an oil and gas project and the type of legal arrangements normally used in the petroleum sector. The relative advantages and disadvantages of the tax and non-tax instruments used in petroleum fiscal regimes are discussed in Chapter 4. Chapter 5 outlines the features of successful fiscal regimes, while system measures and economic indicators are described in Chapter 6. Finally, in Chapter 7, a sensitivity analysis is used to illustrate some typical fiscal systems' design issues.

Suggested Citation

  • Silvana Tordo, 2007. "Fiscal Systems for Hydrocarbons : Design Issues," World Bank Publications, The World Bank, number 6746, July.
  • Handle: RePEc:wbk:wbpubs:6746
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    File URL: https://openknowledge.worldbank.org/bitstream/handle/10986/6746/409020PAPER0Fi1C0disclosed0Sept0181.pdf?sequence=1
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    References listed on IDEAS

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    1. Kumar, Raj, 1991. "Taxation for a cyclical industry," Resources Policy, Elsevier, vol. 17(2), pages 133-148, June.
    2. Thomas Baunsgaard, 2001. "A Primeron Mineral Taxation," IMF Working Papers 01/139, International Monetary Fund.
    3. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
    4. Garnaut, Ross & Clunies Ross, Anthony, 1975. "Uncertainty, Risk Aversion and the Taxing of Natural Resource Projects," Economic Journal, Royal Economic Society, vol. 85(338), pages 272-287, June.
    5. David J. EVANS, 2006. "Social discount rates for the European Union," Departmental Working Papers 2006-20, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
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    Citations

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    Cited by:

    1. Céline DE QUATREBARBES & Bertrand LAPORTE, 2015. "What do we know about the mineral resource rent sharing in Africa?," Working Papers 201509, CERDI.
    2. Abdul Manaf, Nor Aziah & Mas'ud, Abdulsalam & Ishak, Zuaini & Saad, Natrah & Russell, Alex, 2016. "Towards establishing a scale for assessing the attractiveness of petroleum fiscal regimes – Evidence from Malaysia," Energy Policy, Elsevier, vol. 88(C), pages 253-261.
    3. 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.
    4. Laporte, Bertrand & de Quatrebarbes, Céline, 2015. "What do we know about the sharing of mineral resource rent in Africa?," Resources Policy, Elsevier, vol. 46(P2), pages 239-249.
    5. Bobylev Yuriy & Turuntseva Marina, 2010. "Taxation of the mineral sector," Research Paper Series, Gaidar Institute for Economic Policy, issue 140P.
    6. repec:eee:eneeco:v:69:y:2018:i:c:p:442-455 is not listed on IDEAS
    7. Fjaertoft, Daniel & Lunden, Lars Petter, 2015. "Russian petroleum tax policy – Continuous maneuvering in rocky waters," Energy Policy, Elsevier, vol. 87(C), pages 553-561.
    8. Dina Azhgaliyeva, 2013. "What Makes Oil Revenue Funds Effective," International Conference on Energy, Regional Integration and Socio-economic Development 6023, EcoMod.
    9. Valerie Mercer-Blackman, 2015. "Transitioning the Tax System to Take Advantage of the Natural Gas-Rich Economy in Trinidad and Tobago," IDB Publications (Working Papers) 7368, Inter-American Development Bank.
    10. Smith, James L., 2014. "A parsimonious model of tax avoidance and distortions in petroleum exploration and development," Energy Economics, Elsevier, vol. 43(C), pages 140-157.
    11. Jonas Frank, 2010. "Towards a Fiscal Pact : The Political Economy of Decentralization in Bolivia," World Bank Other Operational Studies 12737, The World Bank.
    12. Yuri Bobylev & Georgy Idrisov & Sergey Sinelnikov-Murylev, 2012. "Export Duties on Oil and Oil Products: Cancel Expediency and Scenario Analysis," Research Paper Series, Gaidar Institute for Economic Policy, issue 161P.

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