RESOURCE REVENUE LAW

Transcription

1 1 Prof Hanri Mostert / Prof Johann Hattingh Faculty of Law; University of Cape Town Tel: Fax: Hanri.Mostert@uct.ac.za RESOURCE REVENUE LAW

2 2 1. COURSE OUTLINE I. COURSE AIMS AND OBJECTIVES This course is aimed at students interested in the regulation of fiscal aspects of the natural resources sector, with a particular focus on minerals and petroleum resources taxation. The course includes a discussion of the theoretical and practical considerations that inform the structure of the regulatory framework in this sector. The obligations placed on right holders in respect of mineral and petroleum resources are set out. Management of the risks inherent to the sector in the context of taxation is also canvassed, including international tax law considerations and obligations. Domestic considerations will also be dealt with, which include key revenue and expenditure side aspects of fiscal frameworks. In addition, the relevant aspects of State contract negotiation will be discussed, setting out the relevant considerations pertaining to, for example, fiscal stability clauses, concessions and fiscal clauses in bilateral investment treaties. Other areas of taxation that are covered with a particular focus on industry features will include the distinction between source and residence taxation, the taxation of offshore exploration activities, and issues concerning transfer pricing in the sector. Following completion of the course, students should have an understanding of the regulatory framework governing taxation of minerals and petroleum. Students should be able to formulate informed legal opinions on the general aspects of fiscal law, including the policy considerations that inform the types of models employed. II. COURSEWORK AND ASSESSMENT Successful completion depends on satisfactory class participation (10%), an assessed research assignment (30%) and a final assessment (60%). The final assessment takes the form of an open-book take-home assessment (date to be confirmed). It will focus specifically on analytical exercises. The coursework component is assessed during the block teaching week, in the following ways: Student presentations, per student (10%) Research assignment (30%) to be prepared during block week and submitted for assessment shortly thereafter.

3 3 III. SUGGESTED BIBLIOGRAPHY 1. Mineral and Petroleum Resources Development Act 28 of Mineral and Petroleum Resources Royalty Act 28 of Mineral and Petroleum Resources Royalty (Administration) Act 29 of Petroleum Pipelines Levies Act 28 of C Nakhle Petroleum Taxation: Sharing the Oil Wealth (2008) Routledge: Oxon chapter Gao, Z, Historical Review of international petroleum agreements (1994), London, Graham & Trotman (Chapter 2). 7. Gao, Z, The Main Features of Modern Petroleum Contracts (1994), London, Graham & Trotman (Chapter 7). 8. PJ Badenhorst and H Mostert Mineral and Petroleum Law of South Africa: Commentary and Statutes (2005) Juta. 9. MO Dale et al South African Mineral and Petroleum Law (2005) LexisNexis. 10. PJ Badenhorst, H Mostert and M Dendy Minerals and Petroleum Vol 18(2) (2007) LAWSA. 11. G Gordan, J Paterson and E Üşenmez Oil and Gas Law: Current Practice & Emerging Trends (2010) Edinburgh Scholarship Online. 12. M Humphreys, J Sachs and J Stiglitz (eds) Escaping the Resource Curse (2007) Columbia University Press. 13. P Daniel, M Keen and C McPherson (eds) The Taxation of Petroleum and Minerals: Principles, Problems and Practice (2010) Routledge. 14. C Nakhle Petroleum Taxation: Sharing the Oil Wealth - A Study of Petroleum Taxation Yesterday, Today and Tomorrow (2008) Routledge. 15. B Taverne Petroleum, Industry and Governments: A Study of the Involvement of Industry and Governments in the Production and Use of Petroleum 2 ed (2008) Alphen aan den Rijn Kluwer Law International. 16. D Zillman et al The Law of Energy Underground: Understanding New Developments in Subsurface Production, Transmission, and Storage (2014) OUP. 17. M Roggenkamp et al Energy Networks and the Law: Innovative Solutions in Changing Markets (2012) OUP. 18. [Session 1] M. Villar Ezcurra et al., in Energy Taxation, Environmental Protection and State Aids: Tracing the Path from Divergence to Convergence (2016) (P. Pistone & M. Villar Ezcurra eds.) IBFD. 19. [Session 5] K. Olsen, Characterisation and Taxation of Cross-Border Pipelines (2012) IBFD 20. [Session 5] J.J.P. de Goede & R. Vlasceanu, Permanent Establishment Implications for Coordination Centres in the Oil and Gas Industry, 67 Bull. Intl. Taxn. 9 (2013), Journals IBFD. 21. [Session 5] M. Stubbe Gelineck, Permanent Establishments and the Offshore Oil and Gas Industry Part 1, 70 Bull. Intl. Taxn. 4 (2016), Journals IBFD.

4 4 IV. SEMINAR THEMES AND DISCUSSION POINTS SESSION 1: INTRODUCTION TO RESOURCE REVENUE LAW Overview of mineral and petroleum legal framework; Distinction between upstream, midstream and downstream regulation; The resource curse thesis; Importance of taxation in the resources sector and challenges; Types of regimes for taxation of natural resources; Resource rent considerations and taxation; Introduction to South African regulatory taxation framework. SESSION 2: MANAGEMENT AND REGULATION OF THE MARKET Political context for resource tax policy and tax administration Company legal entity and capital structure Investment analysis of resource projects Unsuccessful projects Tax accounting and disclosures Cases of tax managerial challenge SESSION 3: DOMESTIC REVENUE LAW CONSIDERATIONS Fiscal framework: o Revenue side incl. tax incentives, special fiscal regimes; o Expenditure side incl. local beneficiation, direct transfer systems; State contract negotiation: o Fiscal stability clauses o Concessions o Fiscal clauses in bilateral investment treaties. Mechanisms to address tax revenue leakages, incl. targeted anti-corruption regimes, anti-tax avoidance rules, soft-law and peer review frameworks.

5 5 SESSION 4: INTERNATIONAL TAX LAW CONSIDERATIONS International considerations and applicable tax treaties; Relationship between tax treaties and domestic law; Tax avoidance considerations for the oil & gas and mining sectors; Capita selecta: International tax issues for oil & gas and mining cross-border activities. o Territorial scope of income tax system & tax treaties for offshore activities. o Treaty access for consortiums. o Double tax relief credits for specific extractive taxes (e.g. mineral royalties). o International coordination efforts to address tax avoidance and evasion. SESSION 5: CHARACTERIZATION OF INCOME & SOURCE TAXATION Distinction between residence and source taxation. Importance of royalties. Direct taxation of business profits, incl. o Permanent establishments supply of equipment; non-resident service providers; Engineering, procurement & design (EPC) contracts, incl. split contractor models. o Sale of development/exploration rights. o Offshore share sales. Taxation issues in business operations: contractors, personal services, SESSION 6: TAXATION CONSIDERATIONS IN RELATION TO EMPLOYEES Domestic considerations Taxation of expatriate employees o Management of cross-border employment income o Management of offshore industry o Expatriate employees in the context of concessions and regulations

6 6 SESSION 7: ISSUES PERTAINING TO TRANSFER PRICING Context and considerations Role of transfer pricing Transfer pricing of commodities Pricing of core services and IP Capita selecta: Transfer pricing issues in the oil & gas and mining sectors, incl. o Engineering, procurement & design (EPC) contract models, incl. split contractor models. o Profit attribution to permanent establishments: non-resident service providers. o Low risk contract mining. SESSION 8: REVENUE ADMINISTRATION AND MANAGEMENT Challenges of Managing Oil and Gas Revenue - Dutch Disease - Revenue Volatility - Non-renewability of resources - Rent seeking Revenue Collection - Procedures for assessment, collection, payment and recovery - Responsible Institutions - Revenue Authority discretion - Revenue Sharing Arrangement/ Intergovernmental Transfers - Disclosure of revenue collected Managing non-compliance by resource companies Need for stabilization fund (natural resource fund)