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

Improving the mobilisation of domestic resources is a hight priority for African countries. The heavy dependence of these countries on the extractives industries implies understanding the mechanisms and consequences of the mining tax Regim applied in Africa on the development of the extractive industry as well as the public revenu collection.

Although several international institutions, non-governmental organisations and universities publish on this issue, data on mining tax Regim in Africa 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 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 all national and international stakeholders. 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: Gabon, Guinea and Chad

2019-05-31

Updated tax data for 2017 and 2018 are now available for Gabon, Guinea and Chad.
In Gabon, a surveillance fee is now charged to holders of mineral rights, in addition to the ground fee (Act No. 021/2017 of 26 January 2018). In Guinea, after having been raised to 20% in 2016, the full VAT rate was restored to 18% in 2017 (Act L/2016/066/AN of 19 December 2016). In addition, the corporate income tax rate was reduced to 25% in 2018 (Act L/2017/059/AN of 12 December 2017). However, this reduction does not apply to mining companies, which remain subject to a rate of 30%. In Chad, a new Mining Act has been adopted (Ordinance No. 004/PR/2018 of 21 February 2018).

New Chadian Mining Act: what changes?

2019-05-30

Chad has adopted a new Mining Act (Ordinance No. 004/PR/2018 of 21 February 2018). It introduces a rent tax of 50% and a free equity for the State in the capital of the operating company of 12.5%. In addition, the Finance Act, 2017, increased the amounts of fixed fees and ground fees (Act No. 033/PR/2016 of 31 December 2016). These measures therefore significantly increase 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) increases from 44% to 71%.

Gabonese surveillance fee: what is it?

2019-05-27

Holders of mineral rights on Gabonese territory are now liable to a surveillance fee. It was introduced by section 12 of the Finance Act, 2018 (Act No. 021/2017 of 26 January 2018). It amounts to 50 CFA Francs per hectare for holders of prospecting licences and 300 CFA Francs per hectare for holders of mining licences and mining concessions. It is due annually, in addition to the ground fee set by section 279 of the Mining Act (Act No. 017/2014 of 30 January 2015). It has to be paid before June 31 of each year to the accounting officer of the Geospatial Agency.

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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