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Oil contracts and government take : Issues for Senegal and developing countries

Author

Listed:
  • Awa DIOUF

    (CERDI Université Clermont Auvergne - CNRS)

  • Bertrand LAPORTE

    (Université Clermont Auvergne – CERDI)

Abstract

The challenge of developing countries that have natural resources is to attract international investors for the valuation of that wealth and to get a « fair » share of oil revenue. So, the « design » of the oil tax system determines the level of resource exploitation and the oil rent-sharing. The analysis of the Senegal oil tax regime is based on the assessment of oil revenue sharing between the government and the operating companies for a 2014 oil discovery, according to two types of contract: a concession contract and a production sharing contract. Regardless of the contract, average effective tax rates in Senegal are low, compared to other African producer countries, and the taxation regime is regressive. Developing countries must, therefore, be vigilant in defining the applicable tax regime, both for the oil sector and, more generally, for extractive industries. The choice of the production sharing contract is certainly the most widespread, but it does not guarantee either the tax system progressivity or a sufficient government take. The taxation rules that specify the production sharing contract must, therefore, be established by skilfully combining income-based taxes and production-based taxes to define a progressive and sufficiently remunerative tax system for both parties, the state and the investor. The balance between these two types of taxation should be systematically calibrated using a rent-sharing model. For Senegal, in particular, it involves a revision of the oil code in force.

Suggested Citation

  • Awa DIOUF & Bertrand LAPORTE, 2017. "Oil contracts and government take : Issues for Senegal and developing countries," Working Papers P209, FERDI.
  • Handle: RePEc:fdi:wpaper:4153
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    Cited by:

    1. Grégoire Rota-Graziosi & Fayçal Sawadogo, 2020. "The tax burden on mobile network operators in Africa," Working Papers hal-03109370, HAL.
    2. Rota-Graziosi, Gregoire & Sawadogo, Fayçal, 2022. "The tax burden on mobile network operators in Africa," Telecommunications Policy, Elsevier, vol. 46(5).
    3. Grégoire Rota-Graziosi & Fayçal Sawadogo, 2021. "The tax burden on mobile network operators in Africa," CERDI Working papers hal-03118496, HAL.
    4. Gregoire Rota-Graziosi & Fayçal Sawadogo, 2021. "The tax burden on mobile network operators in Africa," Post-Print hal-03524787, HAL.
    5. Saad Balhasan & Mohammed Alnahhal & Brian Towler & Bashir Salah & Mohammed Ruzayqat & Mosab I. Tabash, 2022. "Robust Exploration and Production Sharing Agreements Using the Taguchi Method," Energies, MDPI, vol. 15(15), pages 1-19, July.

    More about this item

    Keywords

    extractive industries; oil contract; government take; Senegal; Developing countries;
    All these keywords.

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