From Ownership by State Treasury to Taxation of Private Business in Times of Austerity: Remodelling Government's Rents from Production of Hydrocarbons in Poland

Abstract

Especially after 2008, the vicious circle of surging public debt and surging expenditure with very little efforts to cut public spending in Poland forced the government to seek for new sources of revenue, including further privatisation of companies in energy sector. Since 2011, the hopes were also high for revenue bearing shale revolution. Those factors combined drew the government’s attention to still partly state-owned domestic giants engaged in mining/upstream operations, over which the treasury had been gradually losing control but still kept a significant equity-stake therein. The initial idea was to impose higher exploitation royalties, firstly on copper and silver (since Poland is one of the world’s top producers of both) which happened in 2012, and then on gas and oil in order keep adequate level of economic rent from hydrocarbons’ exploitation, despite selling equity to mostly foreign investors. This article presents and critically assesses the reform of the Polish system of taxation of oil and gas upstream business of 2014 which is scheduled to fully enter into force in 2020.