Oil Revenue Assignments: Country Experiences and Issues
IMF Working Papers, November 1, 2002
Source details
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- Oil Revenue Assignments: Country Experiences and Issues
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Bibliographic details
- Authors: Eric Mottu, Ehtisham Ahmad
- Published: November 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451874464.001
Summary
- Based on country experiences, the paper assesses policy options to assign oil revenues to subnational governments (SNGs).
- The literature recommends that oil revenues be centralized.
- Given political economy considerations, the paper suggests a possible alternative: assign stable oil-tax bases to oil-producing SNGs, supplemented with predictable transfers from the center.
- Oil revenue-sharing arrangements, although commonly used, are identified as the least preferable solution because they:
- complicate macroeconomic management, and
- do not provide stable financing.
- Revenue sharing also does not diffuse separatist tendencies, since oil-producing SNGs would still be better off by keeping their oil revenues in full.
Findings and analysis
- Centralization of oil revenues is the recommendation emerging from the literature reviewed.
- Political economy considerations can justify delegation of stable oil-tax bases to oil-producing SNGs as an alternative to full centralization.
- Predictable transfers from the central government are necessary to supplement assigned oil-tax bases to ensure stable financing for SNGs.
- Revenue-sharing arrangements:
- are commonly used in practice,
- are judged least preferable because they undermine macroeconomic management and financing stability,
- do not remove incentives for separatism among oil-producing SNGs.
Policy recommendations
- Prioritize centralization of oil revenues in line with the literature’s recommendations.
- Where political economy constraints make full centralization infeasible:
- Assign stable oil-tax bases to oil-producing SNGs, and
- Supplement assigned bases with predictable transfers from the center to ensure financing stability.
- Avoid reliance on oil revenue-sharing arrangements because they:
- complicate macroeconomic management, and
- fail to provide stable financing or to reduce separatist incentives.
Subjects and keywords (as listed)
- Subject: Commodities, Environment, Natural resources, Oil, Oil, gas and mining taxes, Revenue sharing, Subnational tax, Taxes
- Keywords: Canada, Colombia, federal government, federation revenue, gas and mining taxes, gas revenue, gas-revenue share, income tax, Indonesia, Mexico, national government, natural resource, Natural resources, Nigeria, North America, Oil, oil revenue, oil-producing countries, oil-producing state, oil-revenue fluctuation, revenue base, revenue sharing, Russia, small nation, Subnational tax, tax assignment, United Arab Emirates, United States, Venezuela, WP
Source: Oil Revenue Assignments: Country Experiences and Issues, Eric Mottu and Ehtisham Ahmad, IMF Working Papers, November 1, 2002.
Content in this bundle
- Oil Revenue Assignments: Country Experiences and Issues - WP/02/203