TAXATION ASPECTS OF SOLE RISK, OR, HOW TO MAKE THE TAX SYSTEM WORK FOR YOU

1986 ◽  
Vol 26 (1) ◽  
pp. 123
Author(s):  
P.A. Wilson
Keyword(s):  
Risk Premium ◽  
Income Tax ◽  
Petroleum Industry ◽  
Petroleum Exploration ◽  
Financial Cost ◽  
Resource Rent ◽  
Scarce Resources ◽  
Work Program ◽  
Work Programs ◽  
The Cost

Two of the problems currently facing the petroleum industry are the cost of funding petroleum and the relatively few major discoveries. Without major discoveries it is difficult, and will become more difficult, to attract new money into the petroleum exploration business.With these factors in mind it becomes more necessary for few companies to spend more money to fund major exploration programs and for the costs to be adequately shared by all participants in a venture.As currently drafted, the sole-risk provision in a Joint Operating Agreement acts as a rationer of scarce resources (i.e. money) for the finding of major new reservoirs. However, by restructuring the sole-risk premium clause it is possible to increase the financial cost (through income tax, resource rent tax, or resource rent royalty, as applicable) upon a party allowing another party to conduct a sole-risk project. This increased penalty might be a major factor in reducing the incidence of sole-risk programs without reducing the number of programs brought forward outside of permit work programs commitments.To achieve this end the sole-risk clause should be restructured to require the sole-risk party to own the project (information, wells, completion, deepening, etc) and then for it to create undivided interests on the sole-risk project for disposal to the non-sole-risk party. In this way, the premium would be received as consideration on sale of an interest in the project and not a disproportionate allocation of product.If this restructure were conducted then the interaction of income tax, and where applicable resource rent tax and resource rent royalty, might well induce all parties to agree to participate in non-work program operations leaving all work programs subject to sharing.

CAPITAL GAINS TAX IN THE PETROLEUM INDUSTRY

1986 ◽  
Vol 26 (1) ◽  
pp. 23
Author(s):  
S. Breckenridge
Keyword(s):  
Income Tax ◽  
Focal Point ◽  
Petroleum Industry ◽  
Capital Gains ◽  
Tax Rates ◽  
Capital Gains Tax ◽  
Resource Rent ◽  
The Government ◽  
Legal Concepts ◽  
The Cost

Eleven years after a previous abortive attempt, another Federal Labor Government has announced its intention to incorporate into the Australian fiscal scene a capital gains tax. The tax is to be levied at marginal and corporate income tax rates on 100 per cent of inflation adjusted gains realised on assets acquired on and after 20 September 1985.Whilst the Government expects its revenue yield to be low even at the end of five years of operation, the cost of protective administration and compliance to be incurred by taxpayers will be substantial.There are substantial areas of uncertainty in the capital gains tax proposals generally, and in particular as they relate to the petroleum industry. These issues, coupled with the prospect of significant legislative delay, will detract further from Australia's appeal as a focal point for essential exploration dollars.The capital gains tax proposals outlined to date deal, superficially, with basic and very tangible property. However, they do not come to grips with issues such as the potential duplication of this tax and resource rent tax, the need to protect the position of non-residents from double taxation, the basis for imposition of capital gains tax upon changes in licence and permit interest through direct or indirect transfers, to avoid bunching distortions, and to more fully provide for rollover relief.The capital gains tax proposals will exacerbate the substantial stress upon the Australian Taxation Office and, coupled with the forthcoming requirement of the Income Tax Assessment Act to accommodate the proposed resource rent tax, will only serve to highlight the fact that in reality the petroleum industry has not been a winner in this area of the tax reform process.The scope for unexpected capital gains tax exposures to arise is marked and will require a clear analysis of several long-established legal concepts to ensure that even reasonable results are obtained.

COMMONWEALTH PERSPECTIVE ON PETROLEUM TAXATION

1999 ◽  
Vol 39 (2) ◽  
pp. 126
Author(s):  
B. Layer
Keyword(s):  
Risk Premium ◽  
Petroleum Industry ◽  
Forward Rate ◽  
Gas Transfer ◽  
Development Activity ◽  
Resource Rent ◽  
Forward Rates ◽  
North West ◽  
Percentage Points

In 1997 the petroleum industry sought modifications to the petroleum resource rent tax (PRRT) regime which applies to all Commonwealth offshore areas except the North West Shelf Project area. Industry argued that the PRRT impeded deepwater exploration and development activity and the exploitation of large stranded gas deposits suitable for conversion to liquids such as LNG. Industry suggested that a more appropriate risk/reward balance in the tax structure could be achieved by providing a volume based PRRT exemption for projects located in water depth greater than 400 m and by increasing the uplift rates for unrealised losses. It was proposed that the risk premium for the general (development) expenditure carry forward rate be increased by five percentage points to the long term bond rate (LTRR) plus 10 percentage points. Another industry recommendation was that exploration expenditures incurred more than five years before the issue of a production license (PL), which currently attract the lower GDP factor rate (the five year rule), be uplifted at the long-term bond rate for the period prior to the five year mark and then rolled forward at LTBR plus 15 percentage points. In addition, industry asked that the reference date for the five year rule should be based on the application date for a PL and not the issue date. For integrated gas to liquid projects, industry requested clarification of the basis for valuing feedstock gas for determining gas liability.In response, the Commonwealth decided to adopt a gas transfer price (GTP) methodology based on a combination of established cost plus and net back formulas to be applied to the up and downstream stages of the project respectively. The difference in the price outcome of the two methods, the residual price, is split 50:50 to obtain the GTP. Details of how the residual price method will be applied are currently being finalised with a view to enacting legislation in 1999-2000. The Commonwealth also responded positively to the industry suggestion that the reference date of the five year rule be applied from the date of application for the PL on the proviso that the appropriate authority receives all information pertaining to a successful application. Recommended changes to the PRRT for deepwater areas and proposed increases to the carry forward rates of undeducted losses were rejected mainly on economic efficiency grounds.

Lowering the cost of funds for exploration: the case for tax-based equity financing incentives

2020 ◽  
Vol 60 (2) ◽  
pp. 569
Author(s):  
Kenneth Wee
Keyword(s):  
Oil And Gas ◽  
Petroleum Industry ◽  
Equity Capital ◽  
Petroleum Exploration ◽  
Security Requirements ◽  
Equity Financing ◽  
Return On Capital ◽  
Oil And Gas Resources ◽  
The Cost ◽  
Taxation System

Exploring for, and discovering, new oil and gas resources is essential to an oil and gas company’s ability to replenish and enhance its reserves base. With rising future demand for clean, sustainable and affordable energy sources and the important role and contribution of the Australian petroleum industry in the evolving global energy mix, continual investment in exploration activity will be the key to unlocking the prospectivity of undeveloped acreage, particularly in frontier areas. However, exploration is inherently risky and costly. Companies constantly compete for scarce capital to provide the necessary funding to undertake exploration activities. Financial capacity underwrites the ability to bid for exploration acreage by offering commensurate work program commitments. For junior explorers in the early exploration stage, liquidity constraints can mean that the covenants, collateral security requirements and periodic servicing obligations associated with raising debt financing are prohibitive. Equity investors, on the other hand, typically demand a higher return on capital. A fresh policy approach to encouraging petroleum exploration in Australia should be considered by government to incentivise the providers of equity capital to risk money for exploration ventures. This paper considers three models that are used internationally: (1) flow-through shares, (2) worthless stock deductions and (3) notional interest deductions for equity financing. This paper provides a comparative in-principle analysis of each model and offers some suggestions on how these models may be adapted to an Australian context and embedded into the existing taxation system.

PETROLEUM EXPLORATION ON OUR PUBLIC LANDS

Geophysics ◽  
1953 ◽  
Vol 18 (1) ◽  
pp. 201-211 ◽  
Author(s):  
John R. Killough
Keyword(s):  
Oil And Gas ◽  
Petroleum Industry ◽  
Public Lands ◽  
Oil And Gas Industry ◽  
Petroleum Exploration ◽  
Bureau Of Land Management ◽  
Gas Industry ◽  
Conservation Policies ◽  
Conservation Projects ◽  
The Cost

Exploration for oil and gas has soared to an all time maximum, and it will continue to increase. In eleven western states such exploration will be predominantly on our public lands. These lands are managed to (1) conserve and perpetuate natural resources, (2) give greatest good to the greatest number, and (3) have the benefits exceed the cost. The conservation program of the Bureau of Land Management is engaged in the construction of soil and moisture conservation projects, range improvements, and revegetation. At the present time the Bureau is actively engaged in controlling the poisonous invader Halogeton, employing herbicides and reseeding. Seismic methods, as often employed, may be destructive to soil and vegetation or surface resources and therefore opposed to other activities and interests. Direct losses occur through improperly bulldozed trails and the use of stockwater reservoirs. Shot holes left unplugged are dangerous. The oil and gas industry must develop conservation policies within its own ranks. Roads may be properly constructed and damage repaired. The petroleum industry must decide by its own actions its future place on our public domain.

What's your gas worth: a thrilling or a taxing matter?

2019 ◽  
Vol 59 (2) ◽  
pp. 744
Author(s):  
Kenneth Wee
Keyword(s):  
Natural Gas ◽  
Income Tax ◽  
Processing Plant ◽  
Pricing Model ◽  
Resource Rent ◽  
Gas Processing ◽  
Pricing Options ◽  
Petroleum Resource ◽  
The Cost

Australia is poised to imminently become the world’s largest liquefied natural gas (LNG) producer. The prices realised for Australia’s natural gas, whether for export LNG or domestic consumption, dictate the level of revenues and, ultimately, the profitability and returns, of the gas producers. A rational producer will seek to maximise the price or return for the gas it supplies. A portion of a producer’s remuneration for its gas is then shared with the community via taxes and royalties. In Australia, these imposts are triggered at different taxing points, hence necessitating a determination of what the gas is worth at each point. Typically, for royalties, it is the wellhead value; for the petroleum resource rent tax, it is either the value at the domestic gas processing plant outlet or the value of feed gas just before liquefaction; and, for income tax, it is the proceeds or consideration for the gas when sold or exported. Wherever related party transactions occur, the price must be set at arm’s length and reflect market realism. Where gas must be valued at a point devoid of an actual sale, finding a suitable comparable price can be challenging. In such circumstances, pricing options include the cost-plus, the netback and the profit-split methods. Each has its own merits and limitations, and incorporates elements that are susceptible to disputation. Gas producers should consider engaging proactively with the revenue authorities to agree a gas pricing model upfront to mitigate latent tax liabilities if the pricing approach adopted is subsequently challenged.

The Mismatch between Expectations and Realities of AS4 Audits: A Post-Implementation Research Analysis

2017 ◽  
Vol 37 (1) ◽  
pp. 1-19 ◽  
Author(s):  
Sanaz Aghazadeh ◽  
Marietta Peytcheva
Keyword(s):  
Implementation Research ◽  
Risk Premium ◽  
Cost Benefit ◽  
Multiple Methods ◽  
Material Weakness ◽  
Key Stakeholders ◽  
Auditing Standards ◽  
Equilibrium Market ◽  
The Cost ◽  
Research Analysis

SUMMARY We conduct a post-implementation research analysis of AS4, a standard guiding voluntary audits of material weakness (MW) remediation disclosures, to understand the reasons for the scarcity of AS4 audits in practice. We use multiple methods (experiments, comment letter analysis, and surveys) to understand the perspectives of key stakeholders. We find that regulators' expectations of the use of the standard did not come to fruition because an equilibrium market for active use of the standard could not be achieved; that managers desire to engage in AS4 audits for the riskier MWs but do not expect the associated costs to be high; and that auditors are reluctant to audit riskier MWs and would charge a considerable risk premium. Finally, we find that investors value AS4 audits, especially for riskier MWs, and find value in an AS4 audit for those risky MWs beyond that of the year-end audit. The overall findings of our study indicate that a mismatch in the cost-benefit functions of the key stakeholders led to a lack of AS4 audits. Our findings are important given the high costs associated with auditing standards development and approval.

scholarly journals A cost analysis to address issues of budget constraints on the implementation of the indoor residual spray programme in two districts of Maputo Province, Mozambique

2021 ◽  
Vol 20 (1) ◽  
Author(s):  
Neide Canana
Keyword(s):  
Sensitivity Analysis ◽  
Cost Analysis ◽  
Financial Analysis ◽  
Indoor Residual Spraying ◽  
Economic Cost ◽  
Cost Information ◽  
Financial Cost ◽  
Provider Perspective ◽  
The Government ◽  
The Cost

Abstract Background It is frequently said that funding is essential to ensure optimal results from a malaria intervention control. However, in recent years, the capacity of the government of Mozambique to sustain the operational cost of indoor residual spraying (IRS) is facing numerous challenges due to restrictions of the Official Development Assistance. The purpose of the study was to estimate the cost of IRS operationalization in two districts of Maputo Province (Matutuíne and Namaacha) in Mozambique. The evidence produced in this study intends to provide decision-makers with insight into where they need to pay close attention in future planning in order to operationalize IRS with the existent budget in the actual context of budget restrictions. Methods Cost information was collected retrospectively from the provider perspective, and both economic and financial costs were calculated. A “one-way” deterministic sensitivity analysis was performed. Results The average economic costs totaled US$117,351.34, with an average economic cost per household sprayed of US$16.35, and an average economic cost per person protected of US$4.09. The average financial cost totaled US$69,174.83, with an average financial cost per household sprayed and per person protected of US$9.84 and US$2.46, respectively. Vehicle, salary, and insecticide costs were the greatest contributors to overall cost in the economic and financial analysis, corresponding to 52%, 17%, and 13% in the economic analysis and 21%, 27%, and 22% in the financial analysis, respectively. The sensitivity analysis was adapted to a range of ± (above and under) 25% change. There was an approximate change of 14% in the average economic cost when vehicle costs were decreased by 25%. In the financial analysis, the average financial cost was lowered by 7% when salary costs were decreased by 25%. Conclusions Altogether, the current cost analysis provides an impetus for the consideration of targeted IRS operationalization within the available governmental budget, by using locally-available human resources as spray operators to decrease costs and having IRS rounds be correctly timed to coincide with the build-up of vector populations.

scholarly journals PENERAPAN TAX REVIEW SEBAGAI DASAR EVALUASI ATAS PEMENUHAN KEWAJIBAN PERPAJAKAN PPH BADAN DAN PPN

2018 ◽  
pp. 245
Author(s):  
I Kadek Agus Setiawan ◽  
Putu Ery Setiawan
Keyword(s):  
Income Tax ◽  
National Development ◽  
Value Added ◽  
Corporate Income Tax ◽  
Measuring Instruments ◽  
Value Added Tax ◽  
The Subject ◽  
The Difference ◽  
Tax Reporting ◽  
The Cost

Taxes as a source of state revenues are used as a source of funds for governments for national development and measuring instruments to regulate government policies. Taxation or tax review is a measure of all company transactions to calculate the amount of tax payable and predict potential taxes that may arise under applicable tax laws and regulations. This research was conducted at PT. KBIC which is engaged in cargo of Tax Year 2015. The purpose of this study is to determine the effect of the implementation of tax review of corporate income tax and value added tax. The method used in this research is descriptive comparative. Comparing the results of tax reporting by the company with the calculation of Corporate Income Tax and Value Added Tax at PT. KBIC tax year 2015 from the researcher in accordance with the applicable tax provisions in Indonesia. Based on the results of the research, the tax review of the Corporate Income Tax has found differences in the fiscal reconciliation report on the Office of Travel and Phone Charge accounts. Taxpayers make 100% corrections of the cost of mobile phones. It should be corrected cost of 50% of the cost should be. On the company's travel account, the company can not show the official report or notes in the assignment explaining the subject or purpose of the Overseas official's travel related to the company's principal activity that causes the difference of tax correction between the taxpayer and the researcher. Tax review conducted on Value Added Tax, the taxpayer has reported the fiscal reconciliation report correctly and there is no mistake.

scholarly journals THE COST OF NEGATIVE INCOME TAX AS A FISCAL MEASURE TO TACKLE POVERTY IN NORTH MACEDONIA

2020 ◽  
Author(s):  
Ivana Velkovska
Keyword(s):  
Income Tax ◽  
Aggregate Demand ◽  
Household Consumption ◽  
Poor People ◽  
Basic Income ◽  
Positive Effects ◽  
Negative Income ◽  
The World ◽  
The Cost ◽  
Negative Income Tax

This paper makes an effort to evaluate the cost of negative income tax as a fiscal measure aiming to tackle the persistent high poverty rate in Macedonia. Poverty, income inequality and unemployment are expected to rise all around the world due to the pandemic corona virus outbreak and the subsequent economic crisis. Governments around the world have already implemented measures similar to universal basic income with the purpose of increasing household consumption and stimulating aggregate demand but also to mitigate the devastating effects that the recent unfavorable economic developments have on the citizens living in poverty or are at the risk of poverty. However, shrinking fiscal spaces of small economies could be an obstacle to implement such policies. Compared to universal basic income, negative income tax is a less costly policy option that targets the population living in poverty instead of providing payments to everyone regardless of their income. The analysis based on the available data is indicating that implementing such policy would cost as much as 9.7 billion MKD per year, which is 4% of the planned state budget revenues for Y2020, 8% of the planned social transfers for Y2020 and 29% of the funds that the state has made available for tackling the COVID 19 crisis so far. In addition, the negative income tax could trigger various positive effects on the economy. Since poor people spend almost all of their income, it could be expected that implementing negative income tax would rise household consumption. According to the empirical analysis in this paper, household consumption is in highest correlation to GDP growth in Macedonia compared to the other explanatory variables (government consumption, investments, import and export).

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