Tax and contractual arrangements for the exploitation of natural resources
Virmani, Arvind
The paper analyzes the efficiency of several tax-contract systems, such as the resource rent tax, production share system, and royalty. Account is taken of their incentive effects on behaviour of firms under different economic and geological conditions, with particular emphasis on areas where prospects are relatively poor. The paper shows the strengths and weaknesses of systems widely used or recommended for oil exploration and production in developing countries. An analysis of the problem of nationalization risk is also carried out, and some light shed on which of the these systems is best able to cope with this problem.
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