Tax effects upon oil field development in Venezuela

Abstract

Important reforms have been made to the oil sector tax code in Venezuela. Given its diversity of oil resources, there was a concern that some resources were not being exploited because of the structure of the tax code. This paper uses traditional theoretical models to review these reforms. Then, a panel of 821 Venezuelan oil fields was used to estimate the effects of the reforms. The major conclusion reached is that reforms based on the development of marginal fields -fields that will not produce because of the tax structure- may overlook the distortions generated by the tax system in non-marginal fields,distortions that can be greater than is the case in marginal fields.