ABSTRACT
Petroleum exploitation or other non-renewable resource industries in general give rise to pure economic rents. Prospects for a continued long and profitable production period make it important to care about the workings of the petroleum tax system. The system in place allows for depreciation and interest deduction in both tax bases and uplift in the special tax base. The tax base of the corporate tax should define true equity income and should therefore also deduct all capital costs except the cost of equity financing. The oil companies also claim that they can achieve a high degree of 'materiality' in other producing provinces. Thus, the industry has pointed to tax competition as a factor that restricts the tax level in the Norwegian petroleum sector. In the neo-classical framework, neutral taxation will lead companies to simultaneously maximise the before- and the after-tax value of any set of potential projects. Income risk neutrality requires that each tax has full loss offset.
