chapter  10
12 Pages

Petroleum Economics – Ghana’s Petroleum Tax Regime and its Strategic Implications

ByFrancis Mensah Sasraku

Rent extraction mechanisms form part of the core components of fiscal petroleum regimes. They have served as conduits for revenue generation and expression of sovereignty for most oil-producing countries. More importantly the dependency of these countries on oil revenues remains as real economic facts. There have been recent developments in the petroleum economics and taxation literature on principles of what developing countries like Ghana should consider in designing their fiscal regimes. Such principles recommend that these countries should analyse the discovery process, their disadvantaged position in terms of asymmetric information trade-off and the absorptive capacity of their economies in the design of their fiscal regimes. The consideration of these principles in the fiscal systems design is supposed to lead to a systematic generation of optimum economic rent for the oilproducing country in question. It is still unclear whether Ghana has deployed these strategies. This chapter seeks to answer the question: is the current fiscal design aimed at short-term economic rent or long-term revenue maximization given the liquidity constraint environment that Ghana finds itself in as an emerging oil-producing country? The chapter will investigate the effectiveness and adequacy of the various mechanisms in terms of flexibility, neutrality and stability. It will analyse further the upstream petroleum fiscal design structure to ascertain how it promotes rent-seeking objectives without undermining the long-term development of its petroleum resources.