On ad valorem taxation of nonrenewable resource production

Investigating Tax Distortions: An Applied Model of Petroleum Exploration and Extraction Decisions

“…Three frequently analyzed and commonly used taxes are examined in this section: royalties, rentals, and property taxes. Royalties, or severance taxes in the United States with equivalent distortion effects, are the most frequently analyzed of the fiscal devices, with many authors, from Gray [1914] to Rowse [1997], considering their effects. Examined herein is an ad valorem royalty where the discount rate rises faster than the royalty rate (which is constant) as well as prices (also constant).…”

“…Previous authors using simulation models have often compared different taxes by using one benchmark level of government take, for example, Deacon [1993] and Gamponia and Mendelsohn [1985]. Yucel [1986] looked solely at royalties, but considered different royalty rates, as did Rowse [1997]. On the basis of the work of Yucel [1986] and Rowse [1997], distortions introduced by a non‐neutral tax are expected to vary with government take as illustrated in Figure 2.…”

“…Yucel [1986] looked solely at royalties, but considered different royalty rates, as did Rowse [1997]. On the basis of the work of Yucel [1986] and Rowse [1997], distortions introduced by a non‐neutral tax are expected to vary with government take as illustrated in Figure 2. For the tax scenarios considered in this paper, the distortions are calculated over a range of government take levels (by varying the rates of taxation) up to the government take limit.…”

Rents to riches?: the political economy of natural resource-led development

“…The effects of ad valorem royalties are also similar to those of the per-unit tax; that is, they will weight the extraction profi le from present to future, or the other way around, depending on whether the discounted prices fall or rise over time (Rowse 1997). This tax will act as an added cost on the extraction of the resource and there will also be high grading.…”

Taxing a Natural Resource with a Minimum Revenue Requirement

“…This kind of "political" risk is different than that of a classic hold-up (the expropriation risk alluded above) that happens when the project turns out to be too profitable.4 Besides,(Rowse 1997) has computed that the welfare loss induced by an ad valorem tax is likely to be small.…”