A NEW report from EY has found that the continuing low oil price environment is having a dramatic effect on global tax takes.
Launching its Global oil and gas tax guide, EY said the lower for longer oil price consensus is pushing more governments to rethink current tax structures and follow the example of those who have already made adjustments.
According to the report, which examines oil and gas corporate tax regimes in 86 countries, highlights national tax structure changes over the last year.
It found that those countries that introduced or adjusted fiscal regimes to capitalise on the previous high oil price environment, in particular, have had to act quickly in order to remain attractive.
“Governments of oil and gas producing countries have had to reassess their tax structures and revise them accordingly to stay competitive,” EY Global Oil & Gas Tax Leader, Alexey Kondrashov, said.
“Many countries made immediate changes following the oil price crash while others delayed. Now, in a lower for longer price outlook environment, we expect to see more changes. A rebound in oil price won’t come to the rescue.”
The EY report found that tax systems in Brazil, the US and Kazakhstan were among those particularly vulnerable to the oil price drop given the significant share of royalties in each country’s total tax burden.
As a result, in the last year, Brazil has introduced a new royalty-like payment, the US has revised taxes in resource-rich states and Kazakhstan has made adjustments to decrease export duty.
EY said that even countries with profit-based tax systems that generally adjust well to price fluctuations, including the UK, Canada and Norway, have made changes to ensure projects taking place within their borders remain economically viable.
“Governments can’t depend on the return of a high oil price environment,” Mr Kondrashov said.
“Maintaining investment and interest in their domestic industries requires a regime with the flexibility to withstand any price point. The pursuit of a more sustainable model is evident around the world and won’t soon be abandoned.”