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An Evaluation of the Exploration Tax Credit

Author

Listed:
  • CHUN-YAN KUO

    (Department of Finance, Canada)

  • STEVEN CLARK

    (Department of Finance, Canada)

Abstract

The paper evaluates the economic and fiscal impacts in Canada of the exploration tax credit introduced in December 1985. It has examined such issues as the extent of exploration directly attributable to the credit, the cost of the credit to the federal government in forgone tax revenue, the impact of the credit on findings of undiscovered resources, and the degree to which the credit has accomplished its original objectives. The analysis concludes that the exploration tax credit has provided little stimulus to exploration activity in the oil and gas industry due to the fact that exploration costs are a small percentage of overall costs in most offshore oil and gas projects, offshore oil and gas projects are highly risky, and the exploration tax credit is moderate and taxes are only one of the factors for budget exploration by many companies. Moreover, the incentive seemed not to be introduced solely out of concern about exploration in Canada. Providing assistance to accompany the phasing out of the Petroleum Incentives Program was indeed a main objective.

Suggested Citation

  • Chun-Yan Kuo & Steven Clark, 1991. "An Evaluation of the Exploration Tax Credit," Development Discussion Papers 1991-14, JDI Executive Programs.
  • Handle: RePEc:qed:dpaper:173
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    References listed on IDEAS

    as
    1. Robin Boadway & Neil Bruce & Ken McKenzie & Jack Mintz, 1987. "Marginal Effective Tax Rates for Capital in the Canadian Mining Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 20(1), pages 1-16, February.
    2. Glenn P. Jenkins, 2013. "A Cost-Effectiveness Analysis Of Acute Malnutrition Treatment Using Ready To Use Theraupetic Foods," Development Discussion Papers 2012-06, JDI Executive Programs.
    3. Glenn P. Jenkins, 1981. "The Public-Sector Discount Rate for Canada: Some Further Observations," Canadian Public Policy, University of Toronto Press, vol. 7(3), pages 399-407, Summer.
    4. David F. Burgess, 1981. "The Social Discount Rate for Canada: Theory and Evidence," Canadian Public Policy, University of Toronto Press, vol. 7(3), pages 383-394, Summer.
    5. Glenn Jenkins, 1973. "The Measurement Of Rates Of Return And Taxation From Private Capital In Canada," Development Discussion Papers 1973-02, JDI Executive Programs.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    exploration tax credit; frontier energy policy; oil and gas; offshore drilling; cost effectiveness; incrementality;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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