Low taxes could make the oil flow

Oil taxation is a tough nut to crack. An 80 percent production tax could be better than a 25-30 percent tax, if for instance the deductions on exploration are big enough.

Photo: Marit Hommedal - Statoil

Denmark plans to put pressure on the oil companies in the North Sea to make them pay higher taxes, while Russia is pushing exploration taxes all the way down in an effort to bring more foreign companies onto the field. But Denmark is still far from certain to be the one getting the biggest proceeds.

Even though the tax rates on the Danish production are fairly low compared to other countries, Denmark’s tax system exerts very little encouragement in new investments. Many other places have a high tax rate on the production but extremely high deductions related to the exploration phase of the process.

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