## Oil Revenue Assignments: Country Experiences and Issues

_IMF Working Papers, November 1, 2002_

## Source details

**Canonical URL:** [Oil Revenue Assignments: Country Experiences and Issues](https://www.imf.org/en/publications/wp/issues/2016/12/30/oil-revenue-assignments-country-experiences-and-issues-16126)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/30/oil-revenue-assignments-country-experiences-and-issues-16126/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/30/oil-revenue-assignments-country-experiences-and-issues-16126/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/30/oil-revenue-assignments-country-experiences-and-issues-16126/bundle-manifest.json)

## 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**
  - [Oil Revenue Assignments: Country Experiences and Issues - WP/02/203 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2002/_wp02203.pdf.md){rel="alternate" type="text/markdown"}
  - [Oil Revenue Assignments: Country Experiences and Issues - WP/02/203 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2002/_wp02203.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/oil-revenue-assignments-country-experiences-and-issues-16126_