Legal Alerts / 25 Jun 2013

Legal Alert – Taxand Global Energy Tax Survey Report Overview

Tax Uncertainty in the Energy Sector Offers a Mixed Outlook for Multinationals
Governments worldwide could be doing more to encourage investment

In the developed and developing world, governments are seeking more effective methods to collect tax. Energy businesses are traditionally major contributors to national budgets and closely policed by governments who license their activities. Yet governments have also learned that excessive taxation can tip the balance against economic development in their country.

Survey highlights

  • While carbon caps and credit trading have been used by many governments as an attempt to tackle the issue of climate change, there is extensive variation between jurisdictions on the treatment of VAT relief on the trading of carbon permits.  
  • 81% of countries surveyed said their government did provide tax incentives for renewable energy with financing and grants being the most commonly used methods to promote investment.  
  • Emerging markets are now a critical destination for energy multinationals. However, emerging markets present their own tax issues. 
  • Uncertainties surrounding decommissioning of established oil and gas installations in the mature economic markets of Europe were highlighted as a particular issue facing multinationals. 
     

Taxand’s Take

  • Balancing supply and demand, sustainability, security risk, cost and the need to act responsibly is challenging for multinationals. Establishing tax efficient energy structures to drive business performance is therefore key.
  • Carbon Tax to tackle the issue of climate change, the message is clear: C02 emissions are being cut using tax incentives. Through careful tax planning, taking account of local variances in incentive schemes, opportunities can be seized by multinationals
  • Renewables are a long term solution to coping with potential future energy shortages. Assessing your investment portfolio from a global perspective, modelling tax incentives country by country, will ensure tax benefits are leveraged. Also consider negotiating with tax authorities to set your project-related tax incentives now and for the future, to negate legislative change
  • Emerging markets are now a critical destination for energy multinationals. Only through considered tax planning can multinationals fully identify the tax incentives, opportunities and tax risks when investing in emerging markets
  • Decommissioning globally lacks tax relief and brings uncertainty to tax planning activities. The UK is addressing these concerns to ensure a fair return for taxpayers. Multinationals and governments worldwide can learn from the UK’s experience
     

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Taxand Global Energy Tax Survey report 2013

Tax Uncertainty in the Energy Sector Offers a Mixed Outlook for Multinationals
Governments worldwide could be doing more to encourage investment
In the developed and developing world, governments are seeking more effective methods to collect tax. Energy businesses are traditionally major contributors to national budgets and closely policed by governments who license their activities. Yet governments have also learned that excessive taxation can tip the balance against economic development in their country. Taxand’s Global Energy Tax Survey report 2013 explores how current tax conditions are helping or hindering the commercial development of the energy sector across four key areas: 

  • Carbon trading
  • Renewable energy
  • Emerging markets
  • Decommissioning

Above all our survey reveals that uncertainty regarding future tax legislation is hindering energy sector investments worldwide.
Download your copy of the Taxand Global Energy Tax Survey report >

For additional information
Lauri Ahokallio
Janne Juusela
 

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