Abstract
For different reasons the oil companies might apply higher required rates of return than they did some years ago, and this has consequences for investments and tax revenue in oil provinces. By applying various required rates of return as well as various oil prices, this study derives future Norwegian tax revenue during 2018–2050 by using a partial equilibrium model for the global oil market. An important contribution is a detailed modelling of the supply side including the complete petroleum tax system. The model explicitly accounts for reserves, development and production. Both investment in new reserves and production are profit driven. With rising required rates of return fewer of the high cost reserves become profitable to develop and investments decline. Intuitively one would think that lower activity and investments will lead to lower tax income for the government. However, because the government in practice carries a large fraction of the investments because of favourable possibilities for deductions of capital expenses for the oil companies, less investment in a period increases the tax base and the tax income. The initial effect is offset by a subsequent reduction in production which has a negative effect on future taxes. The result is that increasing required rates of return will lead to small variations in net present value of total tax revenue. Further, with lower oil prices, tax take increases significantly when required rates of return rise.
Highlights
This paper looks at the effects on the governments tax take of an assumed rising required rate of return (RRR) in the petroleum sector
Pension funds globally have increasingly begun pulling out of fossil fuel companies over fears that their assets could become “stranded”, or worthless, if governments across the world introduce stricter rules to tackle global warming (Financial Times, 2018b). This can lead to more near-sighted investment strategies and a higher RRR
I contribute to the discussion by showing how rising RRR affects the tax income on the Norwegian continental shelf (NCS), which can be described as an oil province with favourable deductions of capital expenses and a high net tax rate
Summary
Papers comprise research papers intended for international journals or books. Dette kan også føre til at man i større grad fokuserer mer på kortsiktig inntjening og dermed har høyere avkastningskrav enn tidligere. Lavere investeringer vil kun ha en gradvis negativ effekt på fremtidig produksjon på grunn av lange ledetider og slik sett på sikt påvirke statens inntekter negativt. I tillegg gjør et høyere avkastningskrav det lønnsomt for oljeselskapene å utsette noen av investeringene, og dette vil isolert sett hindre fremtidig produksjon fra å avta enda mer. Selv om lavere produksjon gradvis har en negativ innvirkning på de totale skatteinntektene, oppveies dette av den positive effekten på inntektene fra lavere investeringer i den innledende perioden. Årsaken er at den positive effekten på skatteinntektene av reduserte investeringer i den innledende perioden mer enn oppveier den påfølgende negative effekten fra lavere produksjon.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
