Until recent years the proportion contributed to total government revenue by the petroleum industry has continued to increase. However, Australia's oil reserves are now diminishing as known fields are consumed, and exploration efforts have failed to locate new sources of petroleum. The oil industry has called for the relaxation of the government take in order to encourage exploration activity for the replacement of reserves. In an environment of low world prices and continuing high levels of taxation it has been submitted that the balance between taxation and exploration incentives has tipped against exploration activity. The broader economic consequences of lower self sufficiency are significant, particularly in terms of the current account deficit and economic security. The most contentious form of government revenue is secondary taxation. These taxes are levied in addition to company income tax. The present Federal Government has introduced a Petroleum Resource Rent Tax to ensure the community, as a whole, gains an equitable share from the diminution of the country's scarce natural resources. Government discussion on tax reform has concentrated on the most appropriate form of secondary taxation without first examining whether there is, in fact, a case for the imposition of any secondary taxes. This paper addresses the impact of the range of taxes which apply to the petroleum industry. Particular attention is given to the alternate forms of secondary taxation and their effect on the industry in terms of the commonly used criteria for evaluating taxes. These criteria are : equity; efficiency and simplicity. Using this framework the various taxes are analysed individually. Beyond the oil industry the thesis will examine the broader economic effects of petroleum taxation policy, and review the political environment that gives rise to Government policy. From a business perspective, it is in the interests of the oil industry to minimise taxation because of its inverse relationship with profitability. In the light of this objective analysis, the thesis aims to determine the most appropriate form and level of taxation for the petroleum industry in Australia.