IDEAS home Printed from https://ideas.repec.org/p/hal/cdiwps/halshs-01217417.html

Oil Contracts, Progressive Taxation and Government Take in the Context of Uncertainty in Crude Oil Prices: The Case of Chad

Author

Listed:
  • Guy Dabi Gab-Leyba

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • Bertrand Laporte

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

Abstract

Concession Contracts (CC) and Production Sharing Contracts (PSC) have quite different implications for Government Take and the properties of the tax system, such as progressivity. In general, taxation via CC introduces significant distortions in activity, particularly due to the balance of royalties which tax production irrespective of the profitability of the project. So CC is normally regressive while PSC is normally progressive, because PSC taxation depends more directly on the profitability of the project. Chad has the distinction of having introduced PSC in the 2007 Chad oil code, while maintaining a royalty on production. Despite this feature, we show with a Cash Flow model and Monte Carlo simulations that the application of the 2007 oil code introduced more progressivity into taxation. This feature is particularly interesting in the current context of falling crude oil prices, because it maintains a favorable tax regime for exploration and exploitation by multinational oil companies. As a result, the Chad government should reactivate a counter-cyclical policy of oil revenue reserves when the crude oil price increases again.

Suggested Citation

  • Guy Dabi Gab-Leyba & Bertrand Laporte, 2015. "Oil Contracts, Progressive Taxation and Government Take in the Context of Uncertainty in Crude Oil Prices: The Case of Chad," CERDI Working papers halshs-01217417, HAL.
    • Handle: RePEc:hal:cdiwps:halshs-01217417
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01217417
    as

    Download full text from publisher

    File URL: https://shs.hal.science/halshs-01217417/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:aen:journl:1998v19-01-a06 is not listed on IDEAS
    2. 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.
    3. Silvana Tordo, 2007. "Fiscal Systems for Hydrocarbons : Design Issues," World Bank Publications - Books, The World Bank Group, number 6746, April.
    4. International Monetary Fund, 2013. "Chad: Staff-Monitored Program," IMF Staff Country Reports 2013/284, International Monetary Fund.
    5. James Poterba, 2010. "The Challenge of Tax Reform and Expanding the Tax Base," The Economic and Social Review, Economic and Social Studies, vol. 41(2), pages 133-148.
    6. International Monetary Fund, 2013. "Mali: Request for a Three-Year Arrangement under The Extended Credit Facility-Staff Report; Informational Annex; Staff Statement; Press Release on the Executive Board Consideration; and Statement by the Executive Director for Mali," IMF Staff Country Reports 2013/380, International Monetary Fund.
    7. International Monetary Fund, 2014. "Burkina Faso: Seventh Review Under the Extended Credit Facility Arrangement and Request for a New Three-Year Extended Credit Facility Arrangement," IMF Staff Country Reports 2014/043, International Monetary Fund.
    8. repec:aen:journl:1985si-a20 is not listed on IDEAS
    9. Rao, Raghavendra D., 2000. "An integrated modelling framework for exploration and extraction of petroleum resources," Resources Policy, Elsevier, vol. 26(3), pages 133-143, September.
    10. International Monetary Fund, 2012. "Liberia: Eighth Review Under the Three-Year Arrangement Under the Extended Credit Facility: Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Liberia," IMF Staff Country Reports 2012/121, International Monetary Fund.
    11. Mr. James L. Smith, 2012. "Modeling the Impact of Taxes on Petroleum Exploration and Development," IMF Working Papers 2012/278, International Monetary Fund.
    12. International Monetary Fund, 2013. "Jamaica: Request for an Arrangement Under the Extended Fund Facility," IMF Staff Country Reports 2013/126, International Monetary Fund.
    13. repec:aen:journl:1998v19-01-a01 is not listed on IDEAS
    14. International Monetary Fund, 2012. "Burundi: Seventh Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for a New Three-Year Arrangement Under the Extended Credit Facility: Staff Report; Staff Supplement; Press Release on the Executive Board Discussi," IMF Staff Country Reports 2012/028, International Monetary Fund.
    15. Lund, Diderik, 1992. "Petroleum taxation under uncertainty: contingent claims analysis with an application to Norway," Energy Economics, Elsevier, vol. 14(1), pages 23-31, January.
    16. International Monetary Fund, 2014. "Chad: Request for a Three-Year Arrangement Under the Extended Credit Facility," IMF Staff Country Reports 2014/282, International Monetary Fund.
    17. International Monetary Fund, 2014. "Republic of Yemen: 2014 Article IV Consultation and Request for a Three-Year Arrangement Under the Extended Credit Facility-Staff Report; Press Release; and Statement by the Executive Director for the Republic of Yemen," IMF Staff Country Reports 2014/276, International Monetary Fund.
    18. Helmi-Oskoui, B. & Narayanan, R. & Glover, T. & Lyon, K. S. & Sinha, M., 1992. "Optimal extraction of petroleum resources : An empirical approach," Resources and Energy, Elsevier, vol. 14(3), pages 267-285, September.
    19. Blake, Andon J. & Roberts, Mark C., 2006. "Comparing petroleum fiscal regimes under oil price uncertainty," Resources Policy, Elsevier, vol. 31(2), pages 95-105, June.
    20. International Monetary Fund, 2013. "Samoa: Request for Disbursement Under the Rapid Credit Facility-Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Samoa," IMF Staff Country Reports 2013/162, International Monetary Fund.
    21. Petermann, Andrea & Guzman, Juan Ignacio & Tilton, John E., 2007. "Mining and corruption," Resources Policy, Elsevier, vol. 32(3), pages 91-103, September.
    22. International Monetary Fund, 2013. "Pakistan: 2013 Article IV Consultation and Request for an Extended Arrangement Under the Extended Fund Facility," IMF Staff Country Reports 2013/287, International Monetary Fund.
    23. repec:aen:journl:1998v19-01-a05 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Mr. James L. Smith, 2012. "Modeling the Impact of Taxes on Petroleum Exploration and Development," IMF Working Papers 2012/278, International Monetary Fund.
    3. Leandro Medina, 2018. "Assessing Fiscal Risks in Bangladesh," Asian Development Review, MIT Press, vol. 35(1), pages 196-222, March.
    4. 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.
    5. Celine de Quatrebarbes & Bertrand Laporte, 2015. "What do we know about the mineral resource rent sharing in Africa?," CERDI Working papers halshs-01146279, HAL.
    6. 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.
    7. Berg, Magnus & Bøhren, Øyvind & Vassnes, Erik, 2018. "Modeling the response to exogenous shocks: The capital uplift rate in petroleum taxation," Energy Economics, Elsevier, vol. 69(C), pages 442-455.
    8. Fjaertoft, Daniel & Lunden, Lars Petter, 2015. "Russian petroleum tax policy – Continuous maneuvering in rocky waters," Energy Policy, Elsevier, vol. 87(C), pages 553-561.
    9. Zhao, Xu & Luo, Dongkun & Lu, Kun & Wang, Xiaoyu & Dahl, Carol, 2019. "How the removal of producer subsidies influences oil and gas extraction: A case study in the Gulf of Mexico," Energy, Elsevier, vol. 166(C), pages 1000-1012.
    10. Aris Spanos & Niki Papadopoulou, 2013. "A Small Macroeconometric Model for the Cyprus Economy," Working Papers 2013-02, Central Bank of Cyprus.
    11. Banda, Webby, 2023. "A system dynamics model for assessing the impact of fiscal regimes on mining projects," Resources Policy, Elsevier, vol. 81(C).
    12. Mohammed Usman Isyaku & Dauda O. AbdulSalam & M. K. Kamba & Garba Tanko, 2025. "Effect of Petroleum Business Arrangements and Tax Instruments on Investment Climate of Marginal Oil Fields in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(4), pages 3055-3071, April.
    13. Jordan, Brett, 2018. "Economics literature on joint production of minerals: A survey," Resources Policy, Elsevier, vol. 55(C), pages 20-28.
    14. Sanjay Kathuria & Mariem Mezghenni Malouche, 2016. "Toward New Sources of Competitiveness in Bangladesh," World Bank Publications - Books, The World Bank Group, number 22712, April.
    15. Furtado, Lucas S. & Gonçalves, Edson & Costa, Luciano A.R., 2019. "Risk and rewards dynamics: Measuring the attractiveness of the fiscal regime in the presence of exploratory risks," Energy Policy, Elsevier, vol. 132(C), pages 1274-1287.
    16. World Bank, 2013. "Burundi Public Expenditure Review : Strengthening Fiscal Resilience to Promote Government Effectiveness [République du Burundi - Burundi Revue des Dépenses Publiques - Renforcer l’efficacité des pouvoirs publics: Le rôle de la politique budgétaire," World Bank Publications - Reports 21283, The World Bank Group.
    17. Stefania Lovo & Gonzalo Varela, 2022. "Internationally Linked Firms and Productivity in Pakistan: A Look at the Top End of the Distribution," Journal of Development Studies, Taylor & Francis Journals, vol. 58(10), pages 2110-2131, October.
    18. Scott Urban, 2014. "Policy Options for the Euro: Heterodoxy Ahead," Journal of Common Market Studies, Wiley Blackwell, vol. 52(4), pages 742-757, July.
    19. Lovo,Stefania & Varela,Gonzalo J., 2020. "Internationally Linked Firms, Integration Reforms and Productivity : Evidence from Pakistan," Policy Research Working Paper Series 9349, The World Bank.
    20. Aris Spanos & Niki Papadopoulou, 2013. "A Small Macroeconometric Model for the Cyprus Economy," Working Papers 2013-2, Central Bank of Cyprus.

    More about this item

    Keywords

    ;

    JEL classification:

    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:cdiwps:halshs-01217417. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Contact - CERDI - Université Clermont Auvergne (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.