Taxing income in the oil and gas sector — Challenges of international and domestic profit shifting

Sebastian Beer and Jan Loeprick

Energy Economics, 2017, vol. 61, issue C, 186-198

Abstract: This paper provides specific estimates on the scale of profit shifting among hydrocarbon MNEs. We estimate a semi-elasticity of reported Earnings Before Interest and Taxes (EBIT) to sector specific income taxation of −1.68. Observed effects are larger when using Profit and Loss before Taxes, allowing for debt shifting. We find no profit-shifting among entities that are majority-owned by a national government. We also observe a higher vulnerability of non-OECD economies in our sample, which consists of 294 domestic and multinational parents and subsidiaries during the period from 2004 to 2012. To assess the importance of domestic profit-shifting channels, we take advantage of domestic tax differentials among hydrocarbon producers facing additional rent taxes and find that domestic profit shifting accounts for about one third of total income concealed.

Keywords: Optimal taxation; Oil and gas; Hydrocarbon; Base erosion and profit shifting; Transfer pricing; Multinational enterprise (search for similar items in EconPapers)
JEL-codes: H21 H26 H73 Q35 Q38 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:61:y:2017:i:c:p:186-198

DOI: 10.1016/j.eneco.2016.11.013

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