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Unstable oil prices highlight tax structure vulnerabilities

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Hydrocarbon Engineering,

Exporting countries worldwide are reconsidering how they tax the oil and gas industry in the wake of ongoing oil price volatility, according to EY's ‘Global oil and gas tax guide 2015.’ This document, released on 16 June 2015, summarises the oil and gas corporate tax regimes in 84 countries.

New policies needed amid oil price volatility

Fiscal regimes in many countries involve taxation on a per barrel basis. However, taxing based on volume hasn't served exporting countries well amid oil price volatility. Countries that tax profit are best positioned to withstand further dips in oil price. A number of jurisdictions have already begun adjusting fiscal terms.

For example, Argentina, the UK, Colombia, Kazakhstan and China have introduced important changes to their regimes to support and intensify investments.According to Alexey Kondrashov, EY Global Oil & Gas Tax Leader: "Governments must work with industry to create a regime with the flexibility to withstand price fluctuations and incentives to encourage investment regardless of price point. A sustainable model is in reach."

"Over the last decade, and especially in the last five years, governments of exporting countries around the world have gradually introduced or adjusted their fiscal regimes to capitalise on the high oil price environment,” Kondrashov comments. He continues: “The dramatic oil price drop that started a year ago exposed the vulnerabilities of many of these tax structures and is forcing jurisdictions to focus on revising them."

Edited from source by Elizabeth Corner

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