402
A. R. Tom
under different scenarios. The study finds that rent-based royalties cited
in Brazil and the USA significantly often impose relatively higher tax
thresholds on marginal investments. These are compounded by other
cross-border challenges such as transfer pricing and conduit financing
to mention a few. The study concludes that rent-based versions of royalties optimally provided a minimum revenue or output-based royalty is
utilized to ensure governments obtain a requisite level of revenue.
Mintz and Chen (2012) survey the tax and royalty systems existent
within six countries namely Australia, Brazil, Canada (five provinces),
Norway, United Kingdom and four US states in search for the optimal
fiscal regime. The study analyses the impact of both taxes and royalties of
the fiscal regimes on the investment decision. The study postulates that
the more efficient tax should be rent based. The study further ranks the
METRRs of the fiscal regimes on the different levels of the project and
provides recommendations for a rent-based royalty and other rent-based
taxes.
Cottarelli (2012) provides an analytical framework to follow when
providing country-specific advice to developing countries to improve
their natural resources taxation. The study finds that current fiscal
regimes prevalent in the petroleum industry around the World generate
an Average Government take (AETR) ranging from 65 to 85% however
they do not inhibit all avenues of base erosion. The study concludes that
the combination of royalty, a rent tax and standard corporate income tax
could improve fiscal performance of many developing countries.
The model utilized in the quantitative review in this chapter follows
the DCF method utilizing the production profiles and technical costs
estimated for the Kingfisher, Kaiso Tonya and Buliisa fields in Uganda.
Osmundsen et al. (2017) cite that IOCs utilize adjusted project metrics
with minimum thresholds to determine decisions to sanction projects.
Therefore the net cash flow generated was discounted to present value to
account for timing and risk, thus providing an estimate of the Present
Net Value (NPV). The Net project cashflows were utilized to calculate
the project pre-tax IRR, AETR, METR, Break-even prices and other
relevant metrics. This approach assessed the impact of the various fiscal
regimes prevalent in Uganda on the investment decision in cognizance of
scarce and mobile capital while holding other project and jurisdictional
A. R. Tom
under different scenarios. The study finds that rent-based royalties cited
in Brazil and the USA significantly often impose relatively higher tax
thresholds on marginal investments. These are compounded by other
cross-border challenges such as transfer pricing and conduit financing
to mention a few. The study concludes that rent-based versions of royalties optimally provided a minimum revenue or output-based royalty is
utilized to ensure governments obtain a requisite level of revenue.
Mintz and Chen (2012) survey the tax and royalty systems existent
within six countries namely Australia, Brazil, Canada (five provinces),
Norway, United Kingdom and four US states in search for the optimal
fiscal regime. The study analyses the impact of both taxes and royalties of
the fiscal regimes on the investment decision. The study postulates that
the more efficient tax should be rent based. The study further ranks the
METRRs of the fiscal regimes on the different levels of the project and
provides recommendations for a rent-based royalty and other rent-based
taxes.
Cottarelli (2012) provides an analytical framework to follow when
providing country-specific advice to developing countries to improve
their natural resources taxation. The study finds that current fiscal
regimes prevalent in the petroleum industry around the World generate
an Average Government take (AETR) ranging from 65 to 85% however
they do not inhibit all avenues of base erosion. The study concludes that
the combination of royalty, a rent tax and standard corporate income tax
could improve fiscal performance of many developing countries.
The model utilized in the quantitative review in this chapter follows
the DCF method utilizing the production profiles and technical costs
estimated for the Kingfisher, Kaiso Tonya and Buliisa fields in Uganda.
Osmundsen et al. (2017) cite that IOCs utilize adjusted project metrics
with minimum thresholds to determine decisions to sanction projects.
Therefore the net cash flow generated was discounted to present value to
account for timing and risk, thus providing an estimate of the Present
Net Value (NPV). The Net project cashflows were utilized to calculate
the project pre-tax IRR, AETR, METR, Break-even prices and other
relevant metrics. This approach assessed the impact of the various fiscal
regimes prevalent in Uganda on the investment decision in cognizance of
scarce and mobile capital while holding other project and jurisdictional