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Rent Taxes and Royalties in Designing Fiscal Regimes for Non-Renewable Resources

  • Robin Boadway
  • Michael Keen

A fundamental issues in designing any fiscal regime for non-renewable resources is the balance between rent taxes and royalties. This paper reviews the core issues that arise, in terms of both efficient rent extraction and correcting various market failures. Issues of asymmetric information, for instance, can rationalize using both instruments. The paper also shows that, even though they effectively involve the choice of distinct parameters at several dates, rent taxes are not subject to the time consistency problem that is central to the extractive industries, but royalties are (although time consistent royalty policy is efficient conditional on initial resource stocks).

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4568.

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Date of creation: 2014
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Handle: RePEc:ces:ceswps:_4568
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  1. Julien Daubanes & Pierre Lasserre, 2015. "Optimum Commodity Taxation with a Non-Renewable Resource," CESifo Working Paper Series 5270, CESifo Group Munich.
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  10. Steve Bond & Michael Devereux, 1993. "On the design of a neutral business tax under uncertainty," IFS Working Papers W93/01, Institute for Fiscal Studies.
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  12. Venables, Anthony J, 2010. "Resource rents; when to spend and how to save," CEPR Discussion Papers 7875, C.E.P.R. Discussion Papers.
  13. Alan J. Auerbach, 1980. "Wealth Maximization and the Cost of Capital," NBER Working Papers 0254, National Bureau of Economic Research, Inc.
  14. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice," Introductory Chapters, in: Auctions: Theory and Practice Princeton University Press.
  15. Colin Busby & Benjamin Dachis & Bev Dahlby, 2011. "Rethinking royalty Rates: Why There Is a Better Way to Tax Oil and Gas Development," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 333, September.
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