Taxation of multinational petroleum companies : a comparative study

Abstract

The multinational petroleum company (NNC) is made up of a group of companies comprising the main or parent company, subsidiaries, branches of affiliates formed in various jurisdictions, linked by shareholdings and acting in accordance with a common strategy. The geographic distribution of its decision-making may be allotted to regional or administrative centres, which functions may involve more supervision of tho group's activities, management collaboration with respect to the various companies and even capital participation in them. All these various 'entities' are usually subject to the tax regime of their country of origin, commonly referred to as the 'home country', as well as that of the country where they operate, that is, the 'host country'. The present. comparative study of law and policy relating to taxation of MNCs examines both the international aspects of taxation and the domestic taxes of the country where oil deposits occur. The international taxation aspects involve mainly a consideration of two fiscal regimes - that of tho home country and that of the host country. Problems of jurisdiction, double taxation, allocation of income between the two States, tax havens, utilisation of tax credits as well as the broad and complex issue of international tax treaties and agreements between the host and home countries are discussed in Chapter 2. Particular attention is focused on the impact of the host country's tax provisions on the MNCs' tax obligations in its home country and in other foreign jurisdictions. This is an important issue which has to be analysed in order to judge aptly the incentive effect and policy of the tax system of the host country.