Resource Tax Research Articles

Tendering design when price and quality is uncertain

PurposeThe purpose of this paper is to analyze how local and central authorities choose between lowest price and more complex scoring rules when they design supplier-selection mechanisms for public procurements. Five hypotheses are tested: a high level of cost uncertainty and highly non-verifiable quality makes the use of the lowest-price supplier-selection method less likely. Organizational habits and transaction-cost considerations influence the choice of mechanism. Strong quality concerns make complex rules more likely.Design/methodology/approachThe analysis departures from normative theory (rational choice) and is based on the regression analysis and survey data comprising a gross sample of 40 contracting authorities and detailed information about 651 procurements.FindingsMore complex scoring rules are used more often when the authority is uncertain about costs and about delivered quality. Authority effects are also found to directly and indirectly influence the choice of supplier-selection method, suggesting that tendering design is partly driven by local habits and institutional inertia.Practical implicationsThe authors argue that, from a normative point of view, lowest price is an adequate method when the degree of uncertainty is low, for example, because the procured products are standardized and since quality can be verified. When there is significant cost uncertainty, it is better to use the so-called economically most advantageous tender (EMAT) method. (Preferably this should be done by assigning monetary values to different quality levels.) If there is significant uncertainty concerning delivered quality, the contracting authority should retain a degree of discretion, so as to be able to reward good-quality performance in observable but non-verifiable quality dimensions; options to extend the contract and subjective assessments of quality are two possibilities. The main findings are that EMAT and more complex scoring rules are used more often when the contracting authorities report that they experience substantial uncertainty concerning delivered quality and actual costs and that these factors tend to decrease the weight given to price, in line with the predictions. However, the authors also find that this result is mainly driven by variations between authorities, rather than by between-products variation for the same authority. This is from a training of professionals and regulation perspective of policy relevance.Social implicationsContract allocation based on habits rather than rational ground could implicate the waste of resources (tax payers money) as it adventures the matching of the preferences of the public sector (the objective, subject matter, of the procurement) and what the potential supplier offers in its tender.Originality/valueAlthough the principles for supplier selection are regulated by law they give the contracting authority substantial freedom in designing the scoring rule and in choosing what quality criteria to use. The tension between different objectives and the more general question whether the choices made by authorities reflect rational decision making or institutional inertia together motivate the current study. While the design of the supplier-selection mechanism is an important consideration in procurement practice, it has attracted relatively little attention from the academic community.

Evolution of the system of environmental taxes and charges in the Russian Federation

The article presents an analysis of the development of the system of taxes and fees on natural resources in the Russian Federation from 1991 to 2017. The authors note that within the period under review, the system of natural resource taxation has undergone significant changes related to the political and economic transformational processes in the Russian Federation. The last few years of modernization of the domestic economy have required a review of the attitude towards rental income, nature management and the environment as a whole. The last fact is confirmed by the fact that the current year is declared the year of ecology in our country. The aim of the study is to summarize information on the structural elements of the system of environmental taxes, fees and payments in the Russian Federation. The main focus of the authors’ attention is directed to mechanisms for regulating the consumption of natural resources by both natural and legal persons, as well as the need to restore natural potential after consumption within the framework of financial and production activities of economic entities in the Russian Federation. The main analytical materials of the study were the Russian legal framework and accompanying regulatory by-laws in the field of taxation, official explanations of the relevant authorities, accompanying analytical and statistical materials, publications of scientific and periodicals. In order to increase the objectivity of the conclusions, the following methods were used: the method of scientific abstraction, analysis, synthesis, comparison, modeling, grouping of data. In addition, an analysis of the scientific literature, the legal framework was applied. The result of the study was the identification of two basic categories of payments. Environmental taxes (mineral extraction tax, water tax, land tax, transport tax) and environmental charges (collection for use of wildlife and aquatic biological resources. One-time and regular payments for use and collection for participation in a tender (auction) for the use of subsoil, payment for the use of a water body, payment for the negative impact on the environment, recycling environmental charges, payments of the Citizens-legal nature: the rent for the use of forests, for the use of land). The mechanisms of their collection are presented in details. Based on the results of the study, the authors recommend clarifying and simplifying the mechanisms of legislative regulation of the whole set of natural resources payments and proposing the creation of a transparent and understandable management and control system for the careful exploitation of the ecological potential of the territories of the Russian Federation. An analysis of the current system of taxes and the corresponding system of payments made it possible to conclude that at the legislative level there is no single line on the regulation of nature-resource payments. Such randomness, according to the authors, is difficult to explain, since there is no reason why this or that form of tax, collection, civil-legal payment is not argued anywhere. It is noted that the exact concept of environmental tax is absent in the legislation of the Russian Federation, but this terminological phrase is used unofficially to designate some payment obligations.

Taxes, Volatility, and Resources in Canadian Provinces

Tax policy often breeds controversy, especially when rate changes are motivated by volatile resource sectors. This article examines how provincial tax policies respond to changes in resource revenues. Specifically, it (a) estimates the tax–resource elasticity of Canadian provinces and (b) measures the resource sector's contribution to the volatility of provincial gross domestic product (GDP). Empirical results suggest that a $1,000 decrease in per capita resource revenue leads to a 150 basis point increase in a province's marginal personal income tax rate and a 3 percent increase in excise taxes on gasoline. A variance decomposition demonstrates that resource-induced volatility accounts for 76.2, 50.8, and 42.1 percent of the variance of the first-differenced GDP of, respectively, Newfoundland and Labrador, Alberta, and Saskatchewan.

Climate Policy with Tied Hands: Optimal Resource Taxation Under Implementation Lags

In the presence of implementation lags, announced Pigouvian taxation leads to fossil fuel prices that are too low from society’s perspective. This results in excessive emissions and reduced incentives for green innovation. Such effects are compounded by the presence of pre-existing subsidies to fossil fuel use. We show that the intertemporal resource tax path may need to be modified to optimally take into account the perverse incentives from policy lags and pre-existing policies. We find that it might be optimal to subsidize, rather than tax resource extraction at the instant of implementation.

Study on the Carbon Emission Reduction Performance of Resource Tax Reform: Based on the Perspective of Substitution of Factors of Production

Resource tax is an important means to regulate energy consumption. Recent years, in order to alleviate the structural contradiction of supply and demand of energy in our country, the resource tax rate was adjusted repeatedly. This paper introduced energy factor into the production function model, using 2003-2011 industry panel data to estimate the degree of influence of the adjustment of the resource tax rate to the factor input structure and the production efficiency of resource consuming industries. Through empirical research, the following conclusions can be drawn: 1) The increasing resource tax accounted for the proportion of the total tax will prompt the resource consumption industries for re-allocation of production factors and capital and human resources elements will replace energy factor. This is conducive to optimize the structure of production factors, so as to promote the industry to improve production efficiency. 2) In high energy consumption industry, the substitution effect of capital factor on energy factor is more significant than the substitution effect of labor factor on energy factor; however, in low energy consumption industry, the substitution effect of labor on energy factor is more significant than capital elements’ substitution effect. 3) Compared with non-resource production industry, the impact of increasing the rate of resource tax on resource production industry mainly occurs as the alternative of labor actor for energy actor, and the substitution effect of capital is not significant.

The impact of resource tax reform on China's coal industry

Contributing to approximately two-thirds of primary energy consumption, coal usage is the focus of China's energy policies. To regulate the resource taxation system and reduce the burden of coal enterprises, the Chinese government launched a reform of its resource tax system in 2014 for coal, introducing the ad valorem system to replace the volume-based system that had been in place for the preceding thirty years. To assess the impact of the tax reform, this paper constructs two-stage dynamic game models by taking the coal and coal-fired power industries as the players. The market situations of shortage and oversupply are investigated separately. Empirical data are collected to estimate the model parameters for numerical simulations. The model results suggest that the tax reform will reduce both coal prices and the coal industry profitability if the tax levied on each ton of coal is maintained at the same level as before the reform, regardless of whether the market is in a shortage or an oversupply situation. However, the increased buyer's power will amplify the effect of the tax reform. The numerical simulations also provide an estimation of the tax rate of the ad valorem system that maintains the profit of the coal industry. Considering the demand and supply situations in China's coal market, policy recommendations are provided to guide further reform of China's resource tax system.

Australia’s petroleum resource rent tax: Paul Keating, Peter Walsh and other game changers

ABSTRACTIt is now timely to examine the important area of the 1980s reform of petroleum resource taxation, about which there is scant analysis, compared to other Australian Labor Party reform initiatives from that era. The questions concern the roles of Paul Keating, as Treasurer and Peter Walsh, as Minister for Resources and Energy, in petroleum taxation reform. Bourdieu’s social practice theory is used to analyse the consultative process of resource rent tax policy to legislation, which culminated in the Petroleum Resource Rent Tax Assessment Act 1987. This Act introduced a tax on profits, over a specified threshold, generated from the sale of petroleum commodities. To revisit the story of the 1980s petroleum tax reform, this article draws on primary archival documents, predominantly from Craig Emerson’s private papers that cover his time (in 1984) with the Office of the Minister of Resources and Energy. Unique insights are obtained into the consultative process via his hand-written files and personal observations. The findings indicate that although Paul Keating, Bob Hawke and advisors such as Ross Garnaut played important roles, Peter Walsh should be given the most credit for progressing the petroleum resource tax policy in 1984, that later resulted in legislation in 1987.

Assessing the synergistic reduction effects of different energy environmental taxes: the case of China

Imposing any tax among carbon tax, sulfur tax and nitrogen tax on fossil fuels will also reduce the other two air pollutants. Neglecting the synergistic effect of each energy environmental tax and levying carbon tax, sulfur tax and nitrogen tax at the same time will overestimate the abatement cost of air emissions. This study adopts a partial equilibrium model which uses linear demand and supply curves to illustrate the emission reductions in carbon tax, sulfur tax and nitrogen tax. The synergistic reduction effects of CO2, SO2 and NO x are firstly evaluated under the implicit tax scenario of resource tax and consumption tax on fossil fuels. Then it is compared with the synergistic reduction effects of CO2, SO2 and NO x under different explicit tax scenarios of increasing tax rate on carbon tax, sulfur tax and nitrogen tax. If the synergistic reduction effect of explicit environmental taxes is better, this research aims to find one kind of environmental tax among carbon tax, sulfur tax and nitrogen tax with the best synergistic reduction effect and to provide a decision support for the policy makers of energy environmental taxes. The results indicate that explicit environmental taxes have better synergistic reduction effects compared with the current implicit environmental taxes. And explicit sulfur tax can lead to the largest synergistic reduction effects of CO2, SO2 and NO x . Therefore, the policy makers of energy environmental taxes could consider adopting the explicit sulfur tax to reduce various environmental air emissions at the largest amount.

China’s Rare Earths Supply Forecast in 2025: A Dynamic Computable General Equilibrium Analysis

The supply of rare earths in China has been the focus of significant attention in recent years. Due to changes in regulatory policies and the development of strategic emerging industries, it is critical to investigate the scenario of rare earth supplies in 2025. To address this question, this paper constructed a dynamic computable equilibrium (DCGE) model to forecast the production, domestic supply, and export of China’s rare earths in 2025. Based on our analysis, production will increase by 10.8%–12.6% and achieve 116,335–118,260 tons of rare-earth oxide (REO) in 2025, based on recent extraction control during 2011–2016. Moreover, domestic supply and export will be 75,081–76,800 tons REO and 38,797–39,400 tons REO, respectively. The technological improvements on substitution and recycling will significantly decrease the supply and mining activities of rare earths. From a policy perspective, we found that the elimination of export regulations, including export quotas and export taxes, does have a negative impact on China’s future domestic supply of rare earths. The policy conflicts between the increase in investment in strategic emerging industries, and the increase in resource and environmental taxes on rare earths will also affect China’s rare earths supply in the future.

PRODUCTIVITY GAPS AND TAX POLICIES UNDER ASYMMETRIC TRADE

We build a two-country model of endogenous growth to study the welfare effects of taxes on tradable primary inputs when countries engage in asymmetric trade. We obtain explicit links between persistent gaps in productivity growth and the incentives of resource-exporting (importing) countries to subsidize (tax) domestic resource use. The exporters' incentive to subsidize hinges on slower productivity growth and is disconnected from the importers' incentive to tax resource inflows—i.e., rent extraction. Moreover, faster productivity growth exacerbates the importers' incentive to tax, beyond the rent-extraction motive. In a strategic tax game, the only equilibrium is of Stackelberg type and features, for a wide range of parameter values, positive exporters' subsidies and positive importers' taxes at the same time.

Global Justice and Natural Resource Taxation

Proposals for resource taxes and associated transfers have played a very prominent role in contemporary debates about global justice, from Beitz’s ‘resource redistribution principle,’ to Steiner’s Global Fund, to Pogge’s Global Resources Dividend. But such proposals have also attracted some important criticisms, including the claim that resource taxes are unmotivated, or that their impact would be regressive. This paper responds to these challenges, and at the same time it seeks to clarify the role resource taxes should play in an egalitarian project. Still, when we evaluate their potential impact much may turn out to hang on just which resources should be taxed, and which of the ways in which we engage with resources – owning them, extracting them, or consuming them – should render us liable to paying taxes. I will have rather less to say in response to this question, but I shall suggest that in light of the diverse goals which resource taxes are likely to be charged with advancing, a single undifferentiated global tax on natural resources (undifferentiated, that is, either in the sense that it targets all resources, or in the sense that it is exclusively targeted at for instance ownership or consumption) is unlikely to promote justice most effectively. On the assumption that a more fine-grained approach may be desirable, the paper ends with a discussion of several proposals for specific resource taxes.

China’s Rare Earth Supply Chain: Illegal Production, and Response to new Cerium Demand

As the demand for personal electronic devices, wind turbines, and electric vehicles increases, the world becomes more dependent on rare earth elements. Given the volatile, Chinese-concentrated supply chain, global attempts have been made to diversify supply of these materials. However, the overall effect of supply diversification on the entire supply chain, including increasing low-value rare earth demand, is not fully understood. This paper is the first attempt to shed some light on China’s supply chain from both demand and supply perspectives, taking into account different Chinese policies such as mining quotas, separation quotas, export quotas, and resource taxes. We constructed a simulation model using Powersim Studio that analyzes production (both legal and illegal), production costs, Chinese and rest-of-world demand, and market dynamics. We also simulated new demand of an automotive aluminum-cerium alloy in the US market starting from 2018. Results showed that market share of the illegal sector has grown since 2007–2015, ranging between 22% and 25% of China’s rare earth supply, translating into 59–65% illegal heavy rare earths and 14–16% illegal light rare earths. There will be a shortage in certain light and heavy rare earths given three production quota scenarios and constant demand growth rate from 2015 to 2030. The new simulated Ce demand would require supply beyond that produced in China. Finally, we illustrate revenue streams for different ore compositions in China in 2015.

Do Natural Disasters Hurt Tax Resource Mobilization?

According to several reports, natural disasters and climate change will intensify and dampen development if appropriate measures are not implemented. Our paper contributes to this literature and analyzes the impact of natural disasters on domestic resource mobilization in developing countries. Using propensity score matching estimators over the period of 1980-2012 for 120 developing countries, our results conclude that government revenues decrease in the aftermath of natural disasters. Moreover natural disasters that occur in border countries have a negative impact on government revenues of neighbor countries. However, the adverse effects of natural disasters are dampened in countries with high level of resilience capacity and stronger governance.

A Price-Based Royalty Tax?

transfer pricing; extractive industries; natural resource taxation; royalties; resource rent tax.

Taxing Resource Rents in Australia - What a Capital Idea

In this paper I use Marx’s analysis of rent to try to understand the complexities associated with the attempts to tax resource rents in Australia. My aim is to dissect ground rent (what the landlord expropriates in capitalist society by virtue of being the owner of land) into its constituent parts – absolute rent for the use of the land and what Marx calls Differential Rent I and Differential Rent II, rents which arise from different qualities in land and different levels of capital investment in land. I will also discuss monopoly rent. Economic rent in the mining industry in Australia arises in some circumstances because of the barrier to capital that is land and land ownership and the monopoly of ownership that the States and Territories have of minerals and resources. In other circumstances rent arises because of demand which pushes the price (or did before the mining boom in Australia ended in mid-2012) above its price of production and hence gives a greater than average rate of return compared to other industries. Barriers to entry (Marx’s alien forces) prevent new investment that would equalise that above average profit back towards the average. The various rent taxes of the Commonwealth and States and Territories then are attempts by the State to claw back some of the rent (surplus or above normal surplus value) flowing to mining capital. They do this either through levies independent of the production of surplus value, in the case of State and Territory royalties, or as income taxes imposed by the Commonwealth on profits arising after surplus value has been created in the process of production. The Commonwealth could take on the role of minerals landlord and demand rent from mining companies by imposing royalties on them across Australia.

The Spillover Effects of Good Governance in a Tax Competition Framework with a Negative Environmental Externality

We investigate the impact of a political regime shift affecting consumers, business interests and lobby contributions when countries engage in tax competition in capital and a polluting resource. When consumers have more influence than resource owners, the resource tax rate and public spending rise while environmental damages, lobbying contribution, and the capital tax rate fall. This response can spillover to other countries leading to lower welfare. Capital tax harmonization improves welfare of consumers and resource owners. Resource tax harmonization and governance harmonization both reduce the influence of lobbying and improve consumer welfare but resource owners are worse off.

Improving the Performance of Natural Resource Taxation in Developing Countries

This paper explores the administrative challenges posed to developing countries as a result of the increasing emphasis in fiscal regimes for natural resource extraction since the Second World War on income-based taxes, including both corporate income and resource rent taxes, as opposed to royalties. The paper identifies both the political consequences and technical challenges (particularly in the area of enforcement of arm’s length pricing in the natural resource context).

Adverse Selection, Commitment and Exhaustible Resource Taxation

Governments design taxation schemes to capture resource rent. However, they usually propose contracts with limited duration and possess less information on the resources than the extractive firms do. This paper investigates how information asymmetry on costs and an inability to commit to long-term contracts affect tax revenue and the extraction path. This paper assumes that governments maximize the tax revenue contingent on the quantity extracted. This study gives several unconventional results. First, when information asymmetry exists, the inability to commit does not necessarily lower tax revenues. Second, under asymmetric information without commitment, an efficient firm may produce during the first period more or less than under symmetric information. Hence, the inability to commit has an ambiguous effect on optimal contract duration. Third, an increase in the discount factor may shift the extraction towards the first period which contradicts Hotelling's rule.

Water Resource Pricing Study Based on Water Quality Fuzzy Evaluation: A Case Study of Hefei City

Price plays an important role in water resources management. The price of water resources can also be considered as a “water resource tax” which reflects the value and opportunity cost of water, and people will pay for the right to use water. Currently, the water resource fees’ effect of regulating resource differential revenues is not manifest and it’s not enough to reflect the principle of paid use of resources as well as regulating resources differential revenues. Due to the ambiguity and complexity of water resources price, this paper uses methods relating to fuzzy mathematics for modeling and processing. The study had a comprehensive consideration of five factors including water quality, water resources per capita, household consumption level, per capita GNP, population or population density to evaluate the water resource price.

Tax Arrangement and Regional Industrial Restructuring: Evidence from Panel Data in China

Regional industrial restructuring has been one of the major items in the transformation of economic development mode. An exploration was made into the influence of tax arrangement on the regional industrial structure by setting up a panel data econometric model based on the evaluation and analysis of the regional industrial structure in China. It was shown that tax arrangement influenced the regional industrial restructuring in terms of three aspects. Microlevel: the turnover tax and income tax appeared with a U-path of influence on upgrading of the industrial structure while appearing with an inverted U-path of influence on rationalization of the industrial structure. In addition, the levy of resource tax had a negative impact on both upgrading and rationalization of the industrial structure. Mesolevel: taxation in the secondary and tertiary industries appeared with a U-path of influence on upgrading of the industrial structure. An increase of taxation in the secondary industry had a negative impact on rationalization of the industrial structure. The taxation in the tertiary industry appeared with an inverted U-path of influence on rationalization of the industrial structure. Macrolevel: the macrotax burden had a U-path of influence on both upgrading and rationalization of the industrial structure.