Unitary Taxation in the Extractive Industry Sector

ICTD Working Paper 35

50 Pages Posted: 22 Jul 2015

See all articles by Erika Siu

Erika Siu

University of Illinois at Chicago - Institute for Health Research and Policy

Sol Picciotto

ICTD

Jack Mintz

University of Calgary - The School of Public Policy; CESifo (Center for Economic Studies and Ifo Institute)

Akilagpa Sawyerr

University of Ghana

Date Written: May 1, 2015

Abstract

This paper analyses whether a global unitary taxation approach to corporate income tax (CIT) can improve the ability of governments to design and administer efficient and effective tax and royalty policies for the extractive industries. Drawing upon experience with unitary approaches to corporate income taxation of the extractive sectors in subnational taxation systems of the United States (US) and Canada, this paper suggests that a unitary CIT should not be used in isolation, or be employed as the dominant source of revenue from the extractive sector. Instead, because of its informational and risk-aligning advantages, a unitary CIT may be best used in combination with other rent/profit-related levies on the extractive sector. At the same time the rent/profit-related levies may be assessed on a more limited base, such as source jurisdiction, in order to alleviate source entitlement concerns. Within this context a unitary CIT is recommended, because it enables more effective design and administration of all taxes in the extractive industries sector.

Keywords: unitary taxation; formulary apportionment; combined reporting; extractive industries; natural resource taxation; royalties; US state corporate income tax system; Canada provincial corporate income tax system

Suggested Citation

Siu, Erika and Picciotto, Sol and Mintz, Jack and Sawyerr, Akilagpa, Unitary Taxation in the Extractive Industry Sector (May 1, 2015). ICTD Working Paper 35, Available at SSRN: https://ssrn.com/abstract=2634008 or http://dx.doi.org/10.2139/ssrn.2634008

Erika Siu (Contact Author)

University of Illinois at Chicago - Institute for Health Research and Policy ( email )

1747 West Roosevelt Road
Chicago, IL 60612
United States

Sol Picciotto

ICTD ( email )

Institute of Development Studies
Librar
Brighton, BN1 9RE
United Kingdom

Jack Mintz

University of Calgary - The School of Public Policy ( email )

Calgary, Alberta
Canada
403-220-7661 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Akilagpa Sawyerr

University of Ghana ( email )

PO Box 25
Legon, Accra LG
Ghana

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