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Taxation of mining, oil and gas sectors

Taxation of mining, oil and gas sectors. 3. General Issues. Characteristics of the mining sector. What are the main differences… … between the mining sector and the manufacturing industry… … that will have an impact on the taxation approaches of these sectors in your country?.

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Taxation of mining, oil and gas sectors

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  1. Taxation of mining,oil and gas sectors 3. General Issues

  2. Characteristics of the mining sector What are the main differences… … between the mining sector and themanufacturing industry… … that will have an impact on the taxation approaches of these sectors in your country?

  3. Characteristics of the mining sector The State has the resources Risks: important initial investment; fluctuation of prices; success not guaranteed Long start-up phase High level of investment in fixed assets The project is more and more expensive The project falls due Frequent reliance on foreign investments

  4. Characteristics of the mining sector Imply multinational corporations Equipment probably imported Production probably exported High amounts involved Importance of the sector Environmental issues Taxation may be on a project and noton a legal entity

  5. Government intervention Taxation of “economic annuity” Non-tax instruments (acquisition of shares or a part of the production, for instance) Specific taxes (tax on the revenues from the exploitationnatural resources, for example) Contractual agreements with some tax provisions Deduction in respect of the initial down payment and capital expenditure Incentives for foreign investments Efforts to ensure tax certainty

  6. Role of taxation (…) The UNCTAD, the ECA and the IMFagree on the fact the important positive impact of the mining sector ondevelopment in Africa is its ability to generate public revenue bymeans of a budgetary system andfiscal transparency. (From “Breaking the Curse”, Southern Africa Research Watch (SARW),Third World Network Africa (TWN Africa), Tax Network Justice (TJN) and coll,March 2009)

  7. Greater role of taxation “(…) there are several examples of badgovernance associated with a limited tax reliance of the State.” “The international community has already identified the need for fighting against the adverse effects of the global systemwhen it generates corruption and bad governance, particularly throughinitiatives supporting transparency with regard to revenues from natural resources.” (“Governance, taxation and accountability”, OECD, 2008)

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