ABSTRACT
Oil and mineral rich countries face a dilemma in taxing these activities. The actual impact of oil and mineral taxation on sector performance will depend on a variety of factors related to the particular design of taxes and their enforcement. To capture potential effects of the quality of oil and mineral taxes, the chapter estimates the interaction of total sectoral tax ratios with indexes of the quality of oil tax regimes and of the overall quality of country institutions. Taxes on the value of production also generate higher tax revenues in the short run and lower in the future as compared to corporate income taxes, for the same present value of taxes. If the amount of fiscal revenues derived from oil and mineral exploitation is too low, the country may miss opportunities for socially productive investments in human capital and infrastructure.
