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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Video presentation

Credits

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

Taxes and declared profits: Evidence from gold mines in Africa

2022-07-08
Article

Update 2020: Guinea, Mali and Senegal

2022-07-04

Updated tax data for 2020 are now available for Guinea, Mali and Senegal.
In Guinea, there have been no significant changes to taxation (Act No. 51 of 2019). Mali adopted a new Mining Act in 2019 (Ordinance No. 22 of 2019), accompanied in 2020 by its regulations (Decree No. 177 of 2020). Important changes concern the corporate income tax, the ad valorem royalty and the surface royalty. For a mine representative of an average grade (3g/t) and a fixed gold price of $1,400/oz, the average effective tax rate increases from 47.7% to 51.6%. In Senegal, the minimum collection amount of 500,000 CFA francs, provided for in terms of minimum tax, has been repealed (Act No. 17 of 2019), due to its "confiscatory effect on small and medium-sized enterprises in a deficit situation".

New Malian Mining Act: what changes?

2022-07-03

Mali adopted a new Mining Act in 2019 (Ordinance No. 22 of 2019), accompanied in 2020 by its regulations (Decree No. 177 of 2020) and its standard mining agreement (Decree No. 288 of 2020).
Several notable changes can be highlighted for large-scale mining permits. The first concerns the corporate income tax (CIT) rate, reduced to 25% instead of 30%, which is now limited to the first 3 years of production. This reduced rate already existed in the previous Mining Act but it extended over the first 15 years of production. Another important change concerns the ad valorem royalty, the rate of which is now to be set by the General Tax Code, which has not yet been done. It is likely that the old rate of 3% will therefore still apply for the time being. The annual surface royalty is increased from 100,000 to 250,000 CFA francs/km² for gold. These measures lead to an increase in the tax burden for gold mining companies. For a mine representative of an average grade (3g/t) and a gold price fixed at $1400/oz, the average effective tax rate (AETR) increases from 47.7% to 51.6%.
The new Mining Act also attempts to introduce a progressive royalty and an overproduction royalty, to overtax companies in the event of higher prices or higher production than forecast in the feasibility study.

Malian overproduction royalty: what definition?

2022-07-02

Mali's mining legislation has the particularity of having an "overproduction royalty". This was introduced in 2012 and amended in 2019.
The old Mining Act of 2012 (Act No. 15 of 2012) provided that holders of mining permits had to pay "taxes and duties payable under ordinary law" on their overproduction when the quantity actually produced exceeded "by more than 10% the forecast quantity set in the annual production programme approved by the general meeting of shareholders".
The new Mining Act of 2019 (Ordinance No. 22 of 2019) now sets an additional royalty whose rate increases with the extent of overproduction. The rate starts at 4% when the quantity produced exceeds the forecast quantity by 10% and rises to 10% when the overproduction is more than 50%. The tax base consists of the value of the overproduction, i.e. the difference between the actual quantity produced and the forecast quantity, multiplied by the average price.

Tax design and rent sharing in mining sector: Evidence from African gold-producing countries

2022-02-02
Article

Mining taxation in Africa: what recent evolution in 2018?

2020-03-26
Summary brief
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