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Petroleum Taxation Contingent on Counter-factual Investment Behaviour

Author

Listed:
  • Petter Osmundsen
  • Magne Emhjellen
  • Thore Johnsen
  • Alexander Kemp
  • Christian Riis

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.

Suggested Citation

  • Petter Osmundsen & Magne Emhjellen & Thore Johnsen & Alexander Kemp & Christian Riis, 2015. "Petroleum Taxation Contingent on Counter-factual Investment Behaviour," The Energy Journal, , vol. 36(1_suppl), pages 195-214, June.
    • Handle: RePEc:sae:enejou:v:36:y:2015:i:1_suppl:p:195-214
    DOI: 10.5547/01956574.36.SI1.posm
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    References listed on IDEAS

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    Cited by:

    1. Dahl, Roy Endre & Lorentzen, Sindre & Oglend, Atle & Osmundsen, Petter, 2016. "Pro-Cyclical Petroleum Investments and Cost Overruns in Norway by Roy Endré Dahl, Sindre Lorentzen, Atle Oglend, and Petter Osmundsen," UiS Working Papers in Economics and Finance 2016/7, University of Stavanger.
    2. Petter Osmundsen & Kjell Løvås & Magne Emhjellen, 2017. "Petroleum Tax Competition Subject ot Capital Rationing," CESifo Working Paper Series 6390, CESifo.
    3. Magne Emhjellen & Petter Osmundsen, 2016. "Oil Project Selection by Metrics," CESifo Working Paper Series 5898, CESifo.
    4. Dahl, Roy Endré & Lorentzen, Sindre & Oglend, Atle & Osmundsen, Petter, 2017. "Pro-cyclical petroleum investments and cost overruns in Norway," Energy Policy, Elsevier, vol. 100(C), pages 68-78.
    5. Osmundsen, Petter & Wittemann, Anders, 2024. "Petroleum development projects. Concept selection, taxation and recovery rate," Resources Policy, Elsevier, vol. 95(C).
    6. Hiorth, Aksel & Osmundsen, Petter, 2020. "Petroleum taxation. The effect on recovery rates," Energy Economics, Elsevier, vol. 87(C).

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    More about this item

    Keywords

    Petroleum taxation; Uplift; Tax depreciation; Special tax;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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