Revenue Advantages Disadvantages distribution Central distribution of oil revenues Absorbs oil It creates conflicts revenue with oil-rich fluctuations regions, especially if they have distinct More efficient in ethnic identity and adopting new different language investments and it can lead to resource-rich More capability regions seeking to expand the independence national economy More capability to maintain fiscal discipline and administer complex types of taxes Decentralised distribution of oil revenues Revenue sharing Local Local governments governments are can become closer to their stronger and can citizens be encouraged to seek It resolves independence regional conflicts and appeases Percentage of independence revenue sharing is movements most likely decided on political basis Can overcome rather than the gap between economic revenue means environment and expenditure needs of states Producing regions Common always want a unconditional bigger share. transfer to Volatility of oil/production prices jeopardises Some decision making the sub-national transferred to governments’ sub-national revenues governments
Revenue distribution Advantages Disadvantages Central distribution of oil revenues Absorbs oil revenue fluctuations More efficient in adopting new investments More capability to expand the national economy More capability to maintain fiscal discipline and administer complex types of taxes It creates conflicts with oil-rich regions, especially if they have distinct ethnic identity and different language and it can lead to resource-rich regions seeking independence Decentralised distribution of oil revenues Revenue sharing Local governments are closer to their citizens It resolves regional conflicts and appeases independence movements Can overcome the gap between revenue means and expenditure needs of states Common unconditional transfer to Some decision making transferred to sub-national governments Local governments can become stronger and can be encouraged to seek independence Percentage of revenue sharing is most likely decided on political basis rather than economic environment Producing regions always want a bigger share. Volatility of oil/production prices jeopardises the sub-national governments’ revenues