State revenue

The Danish state derives proceeds from North Sea oil and gas production via direct revenue from various taxes and fees: corporate income tax, hydrocarbon tax, royalty, the oil pipeline tariff, compensatory fee and profit sharing.

With a share of about 32 per cent each, profit sharing and corporate income tax are the main sources of state revenue. See the breakdown of state tax revenue in 2011 here.

State revenue from hydrocarbon production in the North Sea aggregated DKK 325 billion in 2011 prices in the period 1973-2011. See the development in state revenue from 1973 to 2011 here.

Also available is an outline of the development in total state revenue for the past five years, broken down on the individual taxes and fees. See the outline of tax revenue for the past five years here.

The development in 2011 was characterized by a fall in production and an increase in the oil price. Total revenue is estimated at DKK 30.6 billion for 2011, an increase of almost 30 per cent from 2010. The state’s share of oil company profits is estimated at 62 per cent for 2011, calcu-lated by year of payment. The marginal income tax is about 71 per cent according to the new rules, including profit sharing, and about 29 per cent according to the old rules, excluding hydrocarbon tax. The rules regarding the hydrocarbon allowance mean that companies taxed according to the old rules do not pay hydrocarbon tax in practice. Licences awarded before 2004 are taxed according to the old rules.

Central Government (CIL) balance and Central Government revenue from the North Sea.  

Future estimates

The Ministry of Taxation estimates that the state revenue will total about DKK 22-30 billion per year from 2012 to 2016, based on the USD 120 oil price scenario. See the five-year forecast of state revenue, illustrated on the basis of three different oil price scenarios here.

The future estimates of corporate income tax and hydrocarbon tax payments are subject to uncertainty with respect to oil prices, production volumes and the dollar exchange rate. In addition, uncertainty attaches to the calculations because they are based on various stylized assumptions, some of which concern the companies’ financing costs.