Transcript The Norwegian Petroleum Tax system

The Resource Rent and Taxation
Lone Semmingsen, Tax Policy Department
Norwegian Ministry of Finance
9 April 2010
1
Ministry of Finance
Taxing Natural Resources - Key Aspects
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Extraordinary profits
Immobile resources
A good tax base!
Profit based tax rules
Stability
Predictability
Simplicity
Efficient tax administration
Ministry of Finance
Design of the Norwegian System
Super-profit:
Potential for increased tax take
Extra allowance for ordinary returns
Should not distort investment incentives
Ordinary income:
• 28% on net income as in other industries
• Neutrality between industries
• Tax on ordinary returns and super-profit
3
Ministry of Finance
Petroleum Taxation
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Production from 1971
Resource rent tax
introduced 1975
Tax rate 50 %, total
marginal tax rate 78 %
profit based
CO2 tax and NOX tax
(negative external
effects)
Royalty phased out
from 2000
Ministry of Finance
Total Government Take from
the Petroleum Sector
450
120
400
Billion NOK 2010 Value
300
80
250
200
60
150
40
100
50
20
0
1971
1976
1981
1986
1991
1996
2001
2006
-50
0
Taxes
5
Environmental taxes
SDFI
Royalty and area fee
StatoilHydro dividend
Oil Price
USD 2010 Value
100
350
6
20
3
20
2
20
2
20
1
20
1
20
0
20
0
19
9
19
9
19
8
0
5
0
5
0
5
0
5
0
5
250
0
5
0
Gas
Oil
4
200
3
150
100
2
50
1
0
0
Million barrels o.e. per day
300
19
8
19
7
19
7
3
Million Sm oil equivalents
Ministry of Finance
Petroleum Production on the NCS
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Ministry of Finance
Hydro Power Taxation
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Production from about 1900
Resource rent tax introduced
1997
RRT tax rate 30 %, total
marginal tax rate 58%
The RRT is neutral with
regard to investments
Property tax 0,7 %
(municipalities)
License fee and entitlement
to buy max 10 % of power
generated (state, county and
municipalities)
Ministry of Finance
Hydro Power - Resource Rent Tax 1997-2008
6000
5000
Mill. NOK
4000
3000
2000
1000
0
1997
1998
1999
2000
2001
2002
2003
Year
8
2004
2005
2006
2007
2008
Ministry of Finance
Norwegian Economic Structure 2009
Share of exports
Share of investments
Petroleum
(27%)
Petroleum
(46%)
Other
Other
Share of GDP
Share of state revenues
Petroleum
(22%)
Other
9
Petroleum
(28%)
Other
Ministry of Finance
State Direct Financial Interest (SDFI)
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The SDFI is an arrangement where the state keeps an
interest in a number of oil and gas fields.
Each interest is decided when licenses are awarded, and
the size of state interest varies between fields.
The state pays its share of investments and costs and
receives a corresponding share of the gross income from
the license.
When Statoil was listed and partially privatised in 2001,
the administration of the SDFI portfolio was transferred to
a new state-owned trust company, Petoro.
Petoro is funded over the state budget and does not
receive any of the income from the SDFI.
Ministry of Finance
3000
175 %
2500
150 %
125 %
2000
100 %
1500
75 %
1000
50 %
500
25 %
0%
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9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
09
0
Capital 31. of dec. (left scale)
Per cent of mainland GDP (right scale)
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Per cent of GDP Mainland
Billion NOK
The Government Pension Fund – Global
Ministry of Finance
Tax basis - Petroleum
on company basis – ring fenced against mainland
Sales income (norm prices)
- Operating costs
- Capital depreciation (16,7 pct. over 6 years)
- Financial costs
- (Deficits from previous years)
= Ordinary tax base liable to 28 pct. tax
- Uplift (investment based extra depreciation, 7,5 pct. 4 years)
- (Excess uplift from previous years)
= Tax base liable to 50 pct. tax
Companies without taxable income
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Carry forward with interest - (risk free + 0,5%)*(1-0,28)
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Tax refund (pay out) of exploration costs

Final losses can be sold or tax reimbursed from the state
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Ministry of Finance
Tax basis – Hydropower
Sales income (market prices)
- Operating costs
- Concession fees
- Property tax
- Depreciation (linear: installations 1,5% equipment 2,5%)
- Uplift (tax values * risk free rate)
= Tax base liable to 30 pct. tax
Negative resource rent will be entitled to a tax
refund (pay out)
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Ministry of Finance
Petroleum Tax – Adapting to Profitability
Exploration project – Value for companies after tax
7000
6000
Million kr
5000
4000
3000
2000
1000
0
-1000
Unprofitable
After petroleum tax
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Fairly profitable
High profitability
After ordinary tax
Ministry of Finance
Hydropower production
Revenues to local/regional government (2006)
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•
•
•
•
Concessionary duties (2006)
Concession power (2006)
Property tax 0,7% (2006)
Natural resource tax
Local/regional ownership
640 mill. NOK
2 600 mill. NOK
1 900 mill. NOK
1 600 mill. NOK
45% of production
Source: Revidert nasjonalbudsjett 2008
State revenues (2008)
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Ordinary tax 28%
Resource rent tax 30%
Tax deductions
State ownership – Statkraft
Source: SSB
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5 000 mill. NOK
5 623 mill. NOK
-2 809 mill. NOK
>40% of production