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 22 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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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, 7 English-speaking countries and 1 portuguese-speaking country: Angola, 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

Distance learning : Mining taxation in Africa

2020-11-18

Would you like to learn about the taxation of the mining sector in Africa and learn how to model mineral resource rent sharing? In partnership with the French Ministry of Europe and Foreign Affairs (MEAE), the IHEDD is opening a new session of its online training on modeling and mining taxation in Africa.
This distance training will take place from January 15 to February 5, 2021. It will require approximately 25 hours of work on your part. In addition, you will benefit from a personalized follow-up from the various trainers. Apply before December 7, 2020. The price is 450 euros. A MEAE scholarship may be granted upon selection of applications. Only 30 places are available.

Update 2019: simulations of mineral resource rent sharing

2020-09-07

Simulations are now available for the year 2019. These simulations make it possible to estimate the mineral resource rent sharing accruing to the State, i.e. the average effective tax rate (AETR), by applying a country's tax legislation to a mine representative of African gold mines.
Of the 22 countries in the sample, 6 experienced a change in their AETR in 2019. In Benin, Chad, Cote d'Ivoire and Mali, AETRs are increasing. While in Mauritania and Zimbabwe, AETRs are declining. However, variations in AETRs are fairly small, except in two countries where they may be particularly large. In Cote d'Ivoire, the elimination of the corporate tax exemption and the minimum tax exemption leads to an increase in the AETR of up to 8.6% for a high-grade mine and a price of gold set at $1,500/oz. In Zimbabwe, the introduction of a variable mining royalty rate based on the price of gold decreases the AETR by up to 26% for a low-grade mine and a price of gold set at $1,100/oz. Note that in Gabon, the coming into force of the new mining act did not result in a change in the AETR because mining taxation remained virtually unchanged.

Update 2019 : Nigeria, Sierra Leone and Tanzania

2020-09-06

Updated tax data for 2019 are now available for Nigeria, Sierra Leone and Tanzania.
In Nigeria, mining taxation has not changed. In Sierra Leone, taxation has also not been amended either (Finance Act, 2019, No. 2 of 2019). In Tanzania, the new version updated to 2018 of the mining act has been published (Mining Act, 2010, No. 14 of 2010, amended by Finance Act, 2018, No. 4 of 2018) and the withholding tax on income from the sale of mineral has been repealed (Written Laws (Miscellaneous Amendments) (No. 2) Act, 2019, No. 6 of 2019).

Mining taxation in Africa: what recent evolution in 2018?

2020-03-26
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Mining taxation in Africa: what recent evolution in 2018?

2019-12-12
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