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Taxing income in the oil and gas sector — Challenges of international and domestic profit shifting

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  • Beer, Sebastian
  • Loeprick, Jan

Abstract

This paper provides specific estimates on the scale of profit shifting among hydrocarbon MNEs. We estimate a semi-elasticity of reported Earnings Before Interest and Taxes (EBIT) to sector specific income taxation of −1.68. Observed effects are larger when using Profit and Loss before Taxes, allowing for debt shifting. We find no profit-shifting among entities that are majority-owned by a national government. We also observe a higher vulnerability of non-OECD economies in our sample, which consists of 294 domestic and multinational parents and subsidiaries during the period from 2004 to 2012. To assess the importance of domestic profit-shifting channels, we take advantage of domestic tax differentials among hydrocarbon producers facing additional rent taxes and find that domestic profit shifting accounts for about one third of total income concealed.

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  • Beer, Sebastian & Loeprick, Jan, 2017. "Taxing income in the oil and gas sector — Challenges of international and domestic profit shifting," Energy Economics, Elsevier, vol. 61(C), pages 186-198.
    • Handle: RePEc:eee:eneeco:v:61:y:2017:i:c:p:186-198
    DOI: 10.1016/j.eneco.2016.11.013
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    Cited by:

    1. Mihalyi,David & Scurfield,Thomas, 2020. "How Did Africa's Prospective Petroleum Producers Fall Victim to the Presource Curse ?," Policy Research Working Paper Series 9384, The World Bank.
    2. Rathke, Alex A.T. & Rezende, Amaury J. & Watrin, Christoph, 2020. "Classification of transfer pricing systems across countries," International Economics, Elsevier, vol. 164(C), pages 151-167.
    3. Sebastian Beer & Ruud de Mooij & Li Liu, 2020. "International Corporate Tax Avoidance: A Review Of The Channels, Magnitudes, And Blind Spots," Journal of Economic Surveys, Wiley Blackwell, vol. 34(3), pages 660-688, July.

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    More about this item

    Keywords

    Optimal taxation; Oil and gas; Hydrocarbon; Base erosion and profit shifting; Transfer pricing; Multinational enterprise;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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