severance tax: meaning, definition, pronunciation and examples
RareFormal / Technical
Quick answer
What does “severance tax” mean?
A tax imposed by a government on the extraction of non-renewable natural resources, such as oil, gas, or minerals, from its territory.
Audio
Pronunciation
Definition
Meaning and Definition
A tax imposed by a government on the extraction of non-renewable natural resources, such as oil, gas, or minerals, from its territory.
A fiscal levy calculated on the value or volume of resources removed from the earth, intended to generate public revenue from finite resources and compensate the state for the loss of its natural wealth. The tax is typically paid by the extracting company.
Dialectal Variation
British vs American Usage
Differences
The term is primarily used in the US context; it is less common in UK English, where 'royalty' or 'extraction levy' might be preferred in similar discussions of North Sea oil and gas.
Connotations
In the US, it often carries connotations of state or local revenue generation and debates over resource exploitation. In the UK, it is a technical term without strong public discourse connotations.
Frequency
Frequent in US policy, legal, and economic texts related to energy and mining. Very low frequency in general British English.
Grammar
How to Use “severance tax” in a Sentence
[Government/State] imposes a severance tax on [resource].Vocabulary
Collocations
Usage
Meaning in Context
Business
The company's profits were affected by the new state severance tax on natural gas.
Academic
The paper analyses the economic efficiency of a severance tax versus a profits-based royalty regime.
Everyday
The news said the debate is about raising the tax on oil drilling.
Technical
The proposed legislation would amend the ad valorem severance tax calculation to be based on wellhead value.
Vocabulary
Synonyms of “severance tax”
Strong
Neutral
Weak
Vocabulary
Antonyms of “severance tax”
Watch out
Common Mistakes When Using “severance tax”
- Using 'severance tax' to refer to a payment made to a laid-off employee (that is a 'severance package' or 'severance pay').
- Confusing it with general sales or income tax.
FAQ
Frequently Asked Questions
No. A severance tax is specifically on the physical removal of a resource, not on the overall profits or income of a company.
Typically, the company or entity that extracts the resource is liable to pay the tax to the government.
No, it is primarily an American term. In the UK context, terms like 'petroleum revenue tax' or 'royalty' are more common.
While traditionally for non-renewables, some jurisdictions may apply similar taxes to the harvesting of timber, though it is often specifically called a 'stumpage tax' or similar.
A tax imposed by a government on the extraction of non-renewable natural resources, such as oil, gas, or minerals, from its territory.
Severance tax is usually formal / technical in register.
Severance tax: in British English it is pronounced /ˈsɛv(ə)rəns tæks/, and in American English it is pronounced /ˈsɛv(ə)rəns tæks/. Tap the audio buttons above to hear it.
Learning
Memory Aids
Mnemonic
Think: SEVERing a resource from the earth incurs a TAX.
Conceptual Metaphor
RESOURCES ARE WEALTH (belonging to the public), and TAXATION IS A TOOL FOR CLAIMING A SHARE.
Practice
Quiz
What is a 'severance tax' primarily applied to?