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Taxation and Pricing of Petroleum Products in Developing Countries: A Framework for Analysis with Application to Nigeria

Author/Editor: Hossain, Shahabuddin Mosherraf
Authorized for Distribution: February 1, 2003
Electronic Access: Free Full Text (PDF file size is 945KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Using the modern theory of public economics as the point of departure, this paper outlines a basic principle for setting taxes and/or prices of commodities based on two key criteria, efficiency and equity. The paper shows that for petroleum products, the basic principle needs modification in the presence of various externalities and market imperfections in a setting where the instruments to address the externalities and imperfections are limited. Drawing from theoretical and empirical literature, the paper provides an operational framework and then illustrates how, for a country like Nigeria, the relevant taxes/subsidies to correct the externalities and to address equity and revenue considerations can be measured with a view to setting prices of petroleum products. However, the paper refrains from making any specific suggestion for policy reform in Nigeria. The framework outlined in the paper can be applied to the analysis of petroleum product taxes and prices in other developing countries.
 
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Series: Working Paper No. 03/42
Subject(s): Oil prices | Nigeria | Oil producing countries | Oil pricing policy | Subsidies | Taxes | Price stabilization
Author's keyword(s): Petroleum products prices | taxes | subsidies | borer prices | externalities | equity | revenue | price stabilization
 
English  
    Published:   February 1, 2003        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA0422003   Pages:   26
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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