IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Petroleum Taxation Contingent on Counter-Factual Investment Behaviour

Abstract:
Petroleum administration can be regarded as a principal-agent problem. The government allocates exploration and production rights to petroleum companies on behalf of the population. The government is the principal and the companies are agents. With the aim of capturing revenue for the state, the government devises a petroleum tax system which takes account of the investment decisions made by the companies, while acknowledging for the fact that the companies may report strategically to the government. An important issue is how tax deductions are to be treated in investment analysis. A discrepancy arises here between assumptions made in some areas of tax theory and the actual investment analyses conducted by the companies. Tax theory has given rise to discussion and controversial tax proposals for the petroleum sector in Norway, Denmark and Australia. It led, for example, to reductions in tax-related depreciation for the Norwegian petroleum industry in May 2013. The article reviews this tax debate and analyses the implications of basing tax design on counter-factual investment behaviour.

Download Executive Summary Purchase ( $25 )



JEL Codes: H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies, Q35: Hydrocarbon Resources, Q41: Energy: Demand and Supply; Prices, Q42: Alternative Energy Sources, G31: Capital Budgeting; Fixed Investment and Inventory Studies; Capacity, G32: Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

Keywords: Petroleum taxation, Uplift, Tax depreciation, Special tax

DOI: 10.5547/01956574.36.SI1.posm

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 36, Adelman Special Issue of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

© 2023 International Association for Energy Economics | Privacy Policy | Return Policy