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8 Pages

Indirect taxes: hindering investment at low prices


Indirect taxes: hindering investment at low prices

Report summary

In this environment, only low-cost investment projects will be approved so, in the meantime, the industry is pursuing as many cost cutting initiatives as it can.  But in some countries, this impetus is being hindered by governments that target spending as a source of tax revenue.

The main indirect taxes are value added tax, import duty and withholding tax on sub-contractor services.  Such ‘stealth’ taxes are highly regressive and have a significant influence on the competitiveness of a country for upstream investment. With the potential to add over 50% to the cost base in some cases, they could deter investors from drilling wells or taking FID.

Governments that want oil companies to continue investing need to play their part.  Those that provide exemption from indirect taxes, or administer efficient refund systems, will have a competitive edge.  Those that insist on retaining such taxes need to consider the negative impact they could have on future investments, especially exploration.

What's included?

This report includes 1 file(s)

  • Indirect taxes: hindering investment at low prices PDF - 708.88 KB 8 Pages, 5 Tables, 4 Figures

Description

This Upstream Oil and Gas Insight report highlights the key issues surrounding this topic, and draws out the key implications for those involved.

This report helps participants, suppliers and advisors understand trends, risks and issues within the upstream oil and gas industry. It gives you an expert point of view to support informed decision making.

Wood Mackenzie's 500 dedicated analysts are located in the markets they cover. They produce forward-looking analysis at both country and asset level across the globe, backed by our robust proprietary database of trusted research.

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  • Executive summary
  • What are indirect taxes?
  • Three main indirect taxes
    • Value added tax
    • Import duty
    • Withholding tax
  • The impact of indirect taxes on investment decisions
    • Field development
    • Exploration drilling
    • Conclusions: the indirect taxation conundrum
  • Appendix: indirect tax impact on well costs

In this report there are 9 tables or charts, including:

  • Executive summary
  • What are indirect taxes?
    • Some current indirect taxation debates
  • Three main indirect taxes
    • The three main Indirect Taxes
    • Different VAT scenarios
    • WHT application
    • WHT and implied profitability: Indonesia example
  • The impact of indirect taxes on investment decisions
    • The impact of indirect taxes on project IRR
    • EMV: with no indirect taxes
    • EMV: with indirect taxes
  • Appendix: indirect tax impact on well costs
    • Indirect taxes: hindering investment at low prices: Table 5
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