Validation of Tax Incentive Dimensions for Marginal Oil Fields’ Development in Malaysia

Abstract

Significant link has been highlighted in the literature between tax incentive and other endogenous variables such as foreign direct investment and business investment climate. However, perception-based measures of tax incentive using its psychometric properties are limited in oil and gas perspective. Validation of tax incentive dimensions with application to marginal oil fields development projects in Malaysia served as objective of this study. Evidence from content validity, exploratory factor analysis, internal consistency reliability, convergent validity, discriminant validity and model fit indices revealed that tax incentive is factorable into four-correlated dimensions; exemption and abatement, loss relief, tax allowance and tax rate.This finding is limited to Malaysian oil and gas setting, specifically, marginal oil field subsector. More evidences are required from other context to compare findings. Comprehension of literature showed that this is the pioneer study attempted the validation of psychometric properties of tax incentive dimensions using experts’ perceptions. Disaggregating tax incentive in this study into four dimensions could have an implication to policy in oil and gas industry.