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.
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

Blog: Mining taxes are on the rise in Africa

2020-07-09

The mining sector is an important contributor to tax revenues in many African countries. In 2015, the extractive sector accounted for more than 20% of the total revenues of nine countries on the continent. Mining tax systems must then both attract investors and ensure sufficient revenues for governments. Following the increase in commodity prices in the second half of the 2000s, most African countries reformed their mining laws in order to capture a larger share of the rent generated by mining companies. This trend continues: mining royalty rates are rising, mineral resource rent taxes are reappearing, and free equity for the state is becoming more and more common.

Update 2019: Congo, Mali and Mauritania

2020-07-07

Updated tax data for 2019 are now available for Congo, Mali and Mauritania.
In the Republic of the Congo, mining taxation has not changed (Act No. 40-2018 of 28 December 2018). In Mali, a new Mining Act has been adopted (Ordinance No. 2019-022/P-RM of 27 September 2019). However, since its entry into force dates from the end of 2019, it will not appear in the database until 2020. In Mauritania, a new General Tax Code has been adopted (Act No. 2019-018 of 29 April 2019). The rate of corporate minimum tax has been reduced to 2%. The value added tax rate has been increased to 20% for petroleum products.

Mauritanian corporate minimum tax: the rate decreases

2020-07-06

In Mauritania, the corporate minimum tax has been modified by the new General Tax Code (Section 51 of Act No. 2019-018 of 29 April 2019). Since 2009, the minimum tax was set at 2.5% of turnover. Since 2019, this rate is now reduced to 2% of taxable revenue for large companies. In addition, the minimum amount is increased to 100,000 ougouiya. However, the applicable rate remains fixed at 2.5% of taxable revenue for medium-size companies.

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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