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Director Tax Audits and Economics,
Norwegian Oil Taxation Office
“Towards fiscal self-reliance: Capacity building for domestic revenue enhancement in Mozambique, Tanzania and Zambia”, 3031st of March 2011,Cardoso Hotel, Maputo
total marginal tax rate 58% • The RRT is profit based • Property tax 0.7 % (municipalities) • licence fee and entitlement to buy max 10 % of power generated . total marginal tax rate 78% • Net profit based • CO2 tax and NOX tax (negative external effects) • Royalty phased out from 2000 Hydro power (production from 1900) • Resource rent tax introduced 1997 • Tax rate 30 %.Resource rent taxes in Norway Oil & Gas (production from 1971) • Resource rent tax introduced 1975 • Tax rate 50%.
Design of the Norwegian Petroleum Tax System Resource Rent: 50% special tax rate Potential for increased tax take Uplift 7.5% in 4 years compensates delayed tax deduction due to capitalization and 6 years depreciation No distortion on investment incentives Ordinary income: • 28% general corporate income tax on net income • Industry neutral. same rate applied in general 6 .
Capital depreciation (16.5% * 4 Years = 30%. over 6 years) .(Losses carried forward) = Ordinary tax base liable to 28 pct.The Petroleum Tax System in Norway Sales income (norm prices for oil) .Operating costs (incl.7 pct. deductible in Special Tax of 50%. tax -(Uplift -7.Financial costs (special limitations) .5% on development investment over 4 years=30%) = Special Tax base liable to 50 pct. • Tax (cash) deduction from uplift: 30%*50%=15% calculated on Development Expenditure . tax • Uplift 7. exploration and decommissioning costs) .
2012 5 .28)= 3.Losses Carried forward real Value Companies with no taxable income: •Can carry forward losses with annual interest •The interest equals risk free interest rate after tax: 5%*(1-0.03.6% •Final losses can be sold or tax reimbursed from the state when business closed down Oil Taxation Office – tittel på presentasjonen 02.
decreases entrance barriers increases competition Oil Taxation Office – tittel på presentasjonen 02.03.Exploration Expenses Reimbursement Exploration Expenses representing a loss: • Taxpayer may elect refund (pay out) of exploration costs (instead of carrying real value of exploration expenses forward) • Exploration expenditure accordingly carried 78% by government and 22% by petroleum company in real terms • New entrants .in equal after tax position compared to petroleum companies with taxable income to deduct exploration expenditure from • Company tax position neutral .2012 6 .often smaller sized petroleum companies .
Financial Expenses – Allocation and Tax Deduction • Petroleum Tax Regime (Offshore) 78% Tax Rate • General Tax Regime (Onshore) 28% Tax Rate Financial Expenditure deductible Offshore in 78% Tax Regime equals: Net Financial Expenditure * 50% * Tax Value Offshore Assets Interest carrying Debt •Financial Expenditure includes interest and exchange losses •Positive Financial Expenditure allocated equally .
47 per liter Oil or Condensate (2011) NOx Emissions Offshore (turbines and flaring) • NOK 16.43 per Kilo (2011) Area Fee: • NOK 33.47 per SM3 Gas (2011) • NOK 0.000 per M2 Kilometer in 2007 – annually adjusted to real prices • From 2007 – new system where area fee similar to a tax on non-activity Royalty : • Abolished from 2000 1)Law 21. 72 .03.2012 8 . December 1990 nr.regarding CO2 emissions on the Norwegian Continental Shelf Oil Taxation Office – tittel på presentasjonen 02.Other Petroleum Revenue Sources Co2 Emissions (1) • NOK 0.
Total Government Take from the Petroleum Sector 450 400 350 Billion NOK 2010 Value 120 100 300 250 200 150 100 50 0 1971 1976 1981 1986 1991 1996 2001 2006 60 40 20 -50 Taxes Environmental taxes SDFI Royalty and area fee StatoilHydro dividend Oil Price 0 USD 2010 Value 80 .
The State’s Direct Financial Interest (SDFI) •The state keeps a direct interest in a number of oil and gas fields •The state pays its share of investments and costs. and receives a corresponding share of the gross income from the license •Each interest is decided when licenses are awarded •The size of state interest depends on how promising the area is considered to be – 25% participation is common .
both for the tax administration and the tax payers •rules can be enforced effectively (without excessive costs) •possible for the companies to understand and comply with the rules • .Objectives of the Norwegian Petroleum Revenue system Transparent system and fair government share • Avoiding distortions of the investment incentives • Stability and predictability for the investors over time • Equal tax treatment of all petroleum companies (NOC) • No negotiations with the companies over tax rules • Simplicity.