Oil Taxes Essay Example | Topics and Well Written Essays - 3750 words

Oil Taxes - Essay ExampleCrude oil, as the raw material in the world foodstuff has effected changes that have affected the economic stability of countries.While price changes has its usual negative implications, adverse supply shocks unexpectedly has created a critical scenario in the reduced aggregate supply in the world oil market thereby increasing its prices. In the early 70s, OPECs control and reduction of oil prices harmonise to Mankiw(1998)1 has aroused the world oil price instantly that has resulted to double-digit inflation and high unemployment prizes. The changing prices of crude oil have its usual implications on the economy that oftentimes results to a world oil crisis. At the moment, the world is witnessing a major oil crisis with the current war in Iraq and the ensuing conflict with the other massive oil producing countries in the Middle East. It is startling to note that material changes in the price of oil can rapidly cascade to the whole economy thereby affecti ng the price structures of consumer goods and services. The United States, as the highest consumer of the worlds oil stands at the loosing end thereby carefully fielding studies to convince the Gulf and Europe to limit their cuts. motive US Energy Secretary Richardson2(2000)has suggested in a new measure to limit the drastic impact on world economic slowdown by discussing the relationship between the world oil price market and the heavy taskation imposed by the government of oil-producing countries on oil production. According to OPEC, the cask of refined oil has been split in to three crude oil price, industry margin and taxes. Governments who share the bulk of the profit are thereby enjoined to earnestly observe their tax policies and exact measures to alleviate the prices of this main commodity.Mineral Taxation around the WorldThe current moves to effective globalization aims to de-emphasize high tax rate, tie tax rate to additional profit or impose low but flat tax on all act ivities. Abu Dhabi, Dubai, Tunisia and Venezuela that have confusable high tax rate do not share in production, while Qatar, Egypt, Yemen and Argentina that share in production have tax rate ranging from 0-40%.73 Most of these countries have done away with royalty while others have rates ranging from 1-12%, which is based on the sliding scale tied to production. Let us look into the different taxation measures imposed by Azerbaijan and Kazakhstan, two minor oil producers who have every potential for economic gains and their implementation of tax reforms. As international capital flows are guided by the prevailing fiscal regimes, there is a need for achieving some degree of harmonization. In this context, it is important to see what types of taxes can be expected on the oil sector industry. The dual nature further imposed on oil and gas as a special character of the mineral sector on other countries has equated the dual role of the government leading to the dilemma of whether taxat ion should be different in the mining sector and general system in terms of rate structure and administration. Taxes of general application may not always be adapted for mineral companies involving higher capital intensity and long-gestation lags. Further, it is difficult to prejudge whether the exemption of the mineral companies from