Should Neutrality be the Key Factor in a Fiscal Regime? The Case of Angola

Oil companies regularly examine the potential after-tax profits derivable from an investment before investing. A Country's fiscal regime is therefore central to achieving this goal. Angola like other sub-Saharan African Countries with large proven reserves is concerned with attracting foreign direct investment to its oil sector with a view to capturing maximum resource rent for the benefit of its populace, the investor on the other hand is focused on making profits. To attract and maintain investment, the Host Government (HG) is expected to establish a fiscal regime founded on the principle of neutrality which suggests that taxes that are capable of influencing the investor's decision in the allocation of resources should not be imposed. The divergent interests between these two groups may not be accommodated adequately by neutral taxes, as a result, fiscal systems are better modeled around the efficiency principle which focuses on assigning investment resources with regard to national objectives. This discourse will focus on assessing Angola's fiscal regime by critically analyzing its effect on investor's decision particularly as it relates to oil production and Government revenue and by examining the ways Angola has attempted to balance its interest with the investor's. The paper concludes by drawing the point that neutrality should be one of the factors for consideration and not necessity the leading objective because other factors like geological potential and the political economy of the country can have significant impact on investment decisions