Taxation and Pricing of Petroleum Products in Developing Countries: A Framework for Analysis with Application to Nigeria
IMF Working Papers, February 1, 2003
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- Taxation and Pricing of Petroleum Products in Developing Countries: A Framework for Analysis with Application to Nigeria
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Bibliographic details
- Authors: Shahabuddin M Hossain
- Published: February 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451846232.001
Overview and Objective
- Author: Shahabuddin M Hossain
- Publication: IMF Working Papers; Working Paper No. 2003/042
- Date: February 1, 2003
- Pages: 27
- Volume: 2003; Issue: 042
- DOI: https://doi.org/10.5089/9781451846232.001
- ISBN: 9781451846232
- ISSN: 1018-5941
- Primary objective: Outline a basic principle for setting taxes and/or prices of commodities using modern public economics, modified for petroleum products in the presence of externalities and market imperfections.
Analytical framework and methodology
- Foundation: Modern theory of public economics; two key criteria—efficiency and equity.
- Modification: The basic pricing/tax principle is adjusted to account for:
- Various externalities associated with petroleum products.
- Market imperfections.
- Limited availability of instruments to address those externalities and imperfections.
- Approach: Draws from theoretical and empirical literature to provide an operational framework.
- Application: Illustrates how to measure relevant taxes/subsidies for a country like Nigeria with the aim of setting petroleum product prices.
- Limitation: The paper refrains from making any specific suggestion for policy reform in Nigeria.
Key findings and analytical components
- Efficiency and equity remain the core criteria for tax/price setting but require modification for petroleum product markets because of externalities and market imperfections.
- Relevant taxes/subsidies can be identified and measured to:
- Correct externalities.
- Address equity considerations.
- Address revenue considerations.
- The operational framework demonstrates measurement approaches applicable to Nigeria and, by extension, to other developing countries.
Policy implications and recommendations
- The paper provides an operational framework to inform policy but does not prescribe specific reform measures for Nigeria.
- The framework is intended to be applicable to the analysis of petroleum product taxes and prices in other developing countries, enabling context-specific measurement of:
- Externality-correcting taxes/subsidies.
- Equity-targeted measures.
- Revenue-impacting instruments.
Topics and subjects covered
- Commodities; Congestion tax; Expenditure; Fuel prices; Gasoline; Oil prices; Prices; Public expenditure review; Taxes
- Geographic and thematic keywords include: Africa; Asia and Pacific; border price; border price rule; border prices; c.i.f. price; congestion cost; cost data; depreciation cost; efficiency; equity; Europe; externalities; Fuel prices; Gasoline; Global; import parity price; kerosene price subsidy scheme; Oil prices; petroleum product; petroleum product prices; petroleum products; price; price stabilization; product; Public expenditure review; revenue; road damage cost; road damage externality; road user charge; road user cost; stabilization scheme; subsidies; taxes; West Africa; WP
This summary is based on the IMF Working Paper "Taxation and Pricing of Petroleum Products in Developing Countries: A Framework for Analysis with Application to Nigeria" by Shahabuddin M Hossain (February 1, 2003).