Taxation of mining industries

Understanding the sharing of the mineral resource rent between States and investors

Introduction

The Ferdi provides the first legal and tax database that lists the tax regime applicable to industrial gold mines in 21 African producing countries since the 1980s and a simulation tool for sharing the mineral resource rent between State and investors.

The tools provided make it possible to: 1) understand the characteristics of the mining taxation, 2) know the evolution of the mining taxation, 3) compare the mining taxation between African countries, 4) compare mining taxation between projects of the same country, 5) assess the sharing of the mineral resource rent between State and investors.

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Video presentation

Credits

This site has been developed by the Ferdi from a database built in partnership with the ICTD and the Cerdi.
Picture by Photo JB Dodane

Accessing an innovative database

The mobilisation of internal public resources is a priority for African countries. The heavy dependence of these countries on the extractives industries implies understanding the mechanisms and stakes of the tax system that applies. Although several international institutions, non-governmental organisations and universities intervene on this issue, mining taxation remains difficult to access. Thus, improving the transparency of information in the African mining sector has become a priority for the international community.

The database provided by the Ferdi has three major innovations:

  • An inventory of the 12 main taxes and duties (rates, bases, exemptions) that are due during the prospecting and mining phases of a mining project;
  • An unprecedented historical depth;
  • The link between each piece of tax information and its legal source.

The database now concerns 14 French-speaking countries and 7 English-speaking countries: Benin, Burkina Faso, Cameroon, Chad, Republic of the Congo, Democratic Republic of the Congo, Cote d’Ivoire, Gabon, Ghana, Guinea, Kenya, Madagascar, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, South Africa, Tanzania and Zimbabwe.

The database currently focuses on gold, that is exploited in 34 of the 54 African countries, making it the second larger producer in the world.

The information provided here is intended for researchers, States and public administrations, international institutions and others working in the field. The objective is to contribute to the improvement of public policies and the information of companies, with a goal of international development.

Full access to the legal and tax data of the website requires a subscription. The subscription is free for individuals or institutions that commit to make no commercial use. On the other hand, financial participation is requested from individuals or companies wishing to use the data for commercial purposes.

Comparing the share of the mineral resource rent that goes to the State

States have to arbitrate between the will to attract foreign investors and the need to increase public revenues. Applied to the economic data of a representative mine and associated with a cash flow model, this database offers the means for researchers and analysts to summarize the tax burden that should apply to mining companies in the African countries according to the legislation. The indicator calculated is the average effective tax rate (AETR), that represents the share of the mineral resource rent captured by the State on a mining project.

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A very high AETR, near 100% or higher, should not be too strictly interpreted. It does not mean that the State manages to collect all of the rent; rather it means that the tax burden makes the mine economically unviable. This illustrates the significant impact of the tax system and the gold price on the profitability of a mining project.

Studying the evolution of the share of the mineral resource rent that goes to the State

The unprecedented historical depth of this database makes it possible to follow the evolution of the average effective tax rates since the 1990s in 21 African countries. This history shows the impact of the successive tax reforms decided by African States (rates, bases, calculation rules) to try to adapt to a context of instability of world prices.

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Medias et news

Update 2017 and 2018 : Cameroon, Republic of the Congo and DRC

2019-04-24

Updated tax data for 2017 and 2018 are now available for Cameroon, Republic of the Congo and Democratic Republic of the Congo (DRC).
Cameroon has adopted a new Mining Act (Act No. 2016/017 of 14 December 2016). The Republic of the Congo has not changed its mining taxation (Act No. 33-2016 of 31 December 2016 and Act No. 41-2017 of 29 December 2017). The DRC has in-depth reformed its Mining Act (Act No. 007/2002 of 11 July 2002 as amended by Act No. 18/001 of 9 March 2018).

Reform of the Congolese Mining Act: what changes?

2019-04-23

The Democratic Republic of Congo (DRC) has in-depth reformed its Mining Act (Act No. 007/2002 of 11 July 2002 as amended by Act No. 18/001 of 9 March 2018). This reform increases on the one hand the mining royalty for precious metals whose rate goes from 2.5% to 3.5% and on the other hand the participation required by the State in the capital of the operating company which goes from 5% to 10% minimum. As a result, these measures increase the tax burden on gold mining companies. For a representative medium grade mine (3g/t) and a gold price of $1250/oz, the average effective tax rate (AETR) increases from 41% to 46%.

New Cameroonian Mining Act: what changes?

2019-04-22

Cameroon has adopted a new Mining Act (Act No. 2016/017 of 14 December 2016). It reduces the ad valorem royalty rate for precious metals to 5%, whereas it was raised to 15% by the Finance Act, 2015 (Act No. 2014/026 of 23 December 2014). This new Mining Act therefore significantly reduces the tax burden applicable to gold mining companies. For a representative medium grade mine (3g/t) and a gold price of $1250/oz, the average effective tax rate (AETR) drops from 67% to 53%.

The sharing of mineral resource rent and progressivity of tax regimes in the mining sector: an analysis of 21 African gold producing countries

2019-04-04
Working paper

Tax convergence in the mining sector of WAEMU countries

2019-02-21
Article
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