13 A Critical Intertemporal Analysis of Uganda’s Fiscal Regime …
401
Fiscal incentives may be utilized by Governments to attract irreversible frontloaded investment within the sector. Upon investment,
the subsequent long-term production period requires an optimal level
of commitment to ensure the projected levels of return envisaged at
the time of investment are obtained. However, the economic significance of petroleum projects may create political pressure to increase the
financial costs imposed during periods of high resource prices (Nakhle
2008). These short-term tax benefits to the State could create long-term
dynamic deadweight losses leading to underinvestment in the basin.
Cognizance and anticipation of the State’s opportunistic behaviour
could incentivize the resource developer to operate strategically by underinvesting, tactically overstating costs (gold plating) and eroding the tax
base through transfer pricing (Lund 2009; Engel and Fischer 2010).
Therefore a detailed understanding of the evolution, nature and impact
of the fiscal regime on the projects within a petroleum province or
internationally is of paramount significance.
Daniel et al. (2016) present a qualitative and quantitative assessment
of fiscal arrangements prevalent in some of the Joint Development Zones
(JDZs) around the World. Quantitative simulations from the Government perspective are utilized to rank the performance according to the
Average Effective Tax Rate (AETR) of the prevalent JDZ fiscal regimes
around the World. The Malaysia Thailand JDZ regime is ranked first,
and the Australia Timor-Leste regime ranked last according to all the
criteria under evaluation and in all scenarios. A detailed example of
the interim arrangements made between Australia and Timor-Leste was
highlighted to establish whether JDZ fiscal arrangements significantly
differ from those under exclusive jurisdictions. The study further highlighted the critical challenges in the designing of JDZs, lessons learnt
from previous experiences and policy recommendations for practical
implementation in the future.
Similarly, Mintz (2016) analyses the impact of company tax and
resource royalties on the incentive to invest in cross-border projects and
the revenues accrued by Governments. The study analyses the marginal
effective and royalty tax rates (METRRs) generated by fiscal systems
of Australia, Brazil, Canada, Norway, United Kingdom and the USA
on exploration, development and extraction using the DCF analysis
401
Fiscal incentives may be utilized by Governments to attract irreversible frontloaded investment within the sector. Upon investment,
the subsequent long-term production period requires an optimal level
of commitment to ensure the projected levels of return envisaged at
the time of investment are obtained. However, the economic significance of petroleum projects may create political pressure to increase the
financial costs imposed during periods of high resource prices (Nakhle
2008). These short-term tax benefits to the State could create long-term
dynamic deadweight losses leading to underinvestment in the basin.
Cognizance and anticipation of the State’s opportunistic behaviour
could incentivize the resource developer to operate strategically by underinvesting, tactically overstating costs (gold plating) and eroding the tax
base through transfer pricing (Lund 2009; Engel and Fischer 2010).
Therefore a detailed understanding of the evolution, nature and impact
of the fiscal regime on the projects within a petroleum province or
internationally is of paramount significance.
Daniel et al. (2016) present a qualitative and quantitative assessment
of fiscal arrangements prevalent in some of the Joint Development Zones
(JDZs) around the World. Quantitative simulations from the Government perspective are utilized to rank the performance according to the
Average Effective Tax Rate (AETR) of the prevalent JDZ fiscal regimes
around the World. The Malaysia Thailand JDZ regime is ranked first,
and the Australia Timor-Leste regime ranked last according to all the
criteria under evaluation and in all scenarios. A detailed example of
the interim arrangements made between Australia and Timor-Leste was
highlighted to establish whether JDZ fiscal arrangements significantly
differ from those under exclusive jurisdictions. The study further highlighted the critical challenges in the designing of JDZs, lessons learnt
from previous experiences and policy recommendations for practical
implementation in the future.
Similarly, Mintz (2016) analyses the impact of company tax and
resource royalties on the incentive to invest in cross-border projects and
the revenues accrued by Governments. The study analyses the marginal
effective and royalty tax rates (METRRs) generated by fiscal systems
of Australia, Brazil, Canada, Norway, United Kingdom and the USA
on exploration, development and extraction using the DCF analysis