Handbook on mining taxation out
A HANDBOOK on mining taxation has published some fiscal policy and administrative proposals to help transform mining taxation and improve revenue mobilisation from the sector in Africa and the rest of the world.
The 236-page handbook presents a menu of innovative fiscal measures contributed by governments, civil society, academia, and industry, that aim to strengthen mining revenue collection, sustainably, while helping combat climate change.
The mining revenue enhancing tool, published by the International Institute for Sustainable Development (IISD) in collaboration with the African Tax Administration Forum (ATAF) was launched at the just ended global conference on the Future of Resource Taxation held in Lusaka, Zambia.
A minimum profit share for govt
The handbook notes, after employing economic models to analyse “profit sharing” from Tanzania, the Philippines and Ecuador that setting the minimum share of benefits for government could be a useful component to incorporate into fiscal regime designs, but says “it does not change the fundamentals and the importance of getting them right.”
“Like with all other fiscal instruments, it will also be important for any government that is considering adopting a minimum government share to analyse whether it will be suitable for the specific country context and type of mine and to determine the threshold above which sharing will be triggered,” the book added.
Production sharing contracts for the mining sector
The handbook acknowledges that many governments generate revenues from the oil sector, often through Production Sharing Contracts (PSCs), leading some countries to explore whether such a model could be replicated in the mining sector.
The book said PSCs may become increasingly common in the mining sector as many countries contemplate reforms that aim to increase national control over critical mineral resources.
“They are no silver bullet; however, under the right circumstances, PSCs can provide more benefits than traditional tax/royalty concessionary regimes to resource-rich countries and protect against some forms of tax base erosion and profit shifting, “ the handbook notes.
According to the authors of the book, “to achieve a positive outcome, it is important for governments to consider PSCs as a central piece of their mining strategy, design PSC terms in light of the prospective profitability of their mineral resources, and build the capacity required to monitor contractor costs and sell the state’s share of minerals. The government may also consider replicating certain aspects of PSCs in their tax/royalty regime to potentially increase mining revenues.”
Ghana based economic policy think-tank, the Institute for Fiscal Studies (IFS) has argued that the Ghanaian government takes steps to increase extractive sector revenue generation through direct state participation or production sharing arrangement as part of the government’s medium-term revenue mobilization strategy to be prepared under the country’s programme with the International Monetary Fund (IMF).
