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 2019 : Cote d'Ivoire, South Africa and Zimbabwe

2020-02-18

Updated tax data for 2019 are now available for Cote d'Ivoire, South Africa and Zimbabwe.
In Cote d'Ivoire, the five-year tax holiday from which mining companies benefited in terms of corporate income tax and minimum tax has been repealed (Ordinance No. 2018-144 of 14 February 2018). In South Africa, mining taxation has not changed. In Zimbabwe, the mining royalty rate now varies according to the price of gold (Act No. 7 of 2019).

Ivorian corporate income tax: end of tax holiday

2020-02-17

In Cote d'Ivoire, the tax holiday granted to mining companies was repealed in 2018 (section 1 of Ordinance No. 2018-144 of 14 February 2018). The Mining Act granted holders of mining rights an exemption from corporate income tax and a minimum tax for the first five years following the date of first commercial production (section 169 of Act No. 2014-138 of 24 March 2014). Exceptionally, however, mining rights granted in 2018 benefited from a 75% tax abatement in the first year and 50% in the second year following the date of first commercial production (section 3 of Ordinance No. 2018-144 of 14 February 2018).

Zimbawean mining royalty: rates change

2020-02-16

In Zimbabwe, gold mining royalty rates were amended by the Finance Act, 2019 (No. 7 of 2019). For small-scale gold producers, the rate increases from 1% to 2%. For other gold producers, the rate was 5%, except in the case of an increase in annual production. Now the rate depends on the selling price of the ore. It is set at 3% when the selling price is below 1200$/oz and 5% when the selling price is above 1200$/oz.

Mining taxation in Africa: what recent evolution in 2018?

2019-12-12
Article

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
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