OIL CONTRACTS AND GOVERNMENT TAKE: ISSUES FOR SENEGAL AND DEVELOPING COUNTRIES

摘要

Senegal could, with the prudent development of its oil resources, leave the LDC category, provided that the oil tax system allows for a sufficient government take from the oil rent. Despite the fact that the country's oil code dates back to 1998, there are several taxation elements applicable to projects that can be specified by the contracts between the state and the operating companies. Senegal's tax system provides for two main contracts: the service contract, which can take the form of production sharing, and the concession contract, where an exploitation concession is granted by the state. There is neither a standard production sharing contract nor a concession contract. Each country defines taxation instruments applicable to each contract. The instruments and terms of contracts determine the properties of the tax system. Generally, the taxation instruments of concession contracts introduce more distortions than do those associated with production sharing contracts, in particular because of the effects of royalties as the main taxation instruments. Indeed, royalties tax the production activity regardless of the project's profitability. The result is often a regressive tax system. Taxation instruments associated with the production sharing contract result in fewer distortions. Indeed, those taxation methods depend more on the project profitability and result in a more progressive tax system.