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Better Mining Tax Collection to Maximize Development Impact

In an effort to ensure that resources from mining have the greatest development impact in resource-rich countries, the World Bank’s Oil, Gas and Mining unit recently organized a major capacity-building event on “Improving Mining Tax Collection Administration Frameworks” in West Africa.


But why is this topic so relevant for countries rich in minerals?

To start, mining fiscal policy is often formulated with clear investment attraction and revenue collection objectives in mind. But rarely it is formulated with adequate consideration of the administrative skills, systems, and processes necessary to effectively and efficiently administer mining revenues collection by Governments.


Yusupha CrookesA mining fiscal regime is only as effective as the combined administrative capacity of the government institutions charged with enforcing it. ||
 Yusupha B. Crookes, Country Director, Ghana, The World Bank

As the World Bank’s Country Director in Ghana, Yusupha B. Crookes, put it in his welcoming remarks, “A mining fiscal regime is only as effective as the combined administrative capacity of the government institutions charged with enforcing it.”

Second, it is important to have systems and processes in place to effectively address oil, gas and mining tax payments administration. The general tax system may not be efficient-enough for the extractives sector.

Third, it is crucial for governments to promote more institutional cooperation and coordination between the ministries of finance and mining. There is also a need for more information sharing between these departments to improve the tax collection administration.

And last, but not least, tying all these three together is the critical need to build the technical capacity of government officials working in these areas.

Addressing challenges

KEY WORKSHOP TOPICS

  • Success factors for an efficient mining tax administration system in the African context;
  • Types of royalties systems and principles of their administration, including valuation points, costs deductibility, assessments and auditing;
  • Elements of mining specific components of corporate income tax and related administrative issues;
  • Private sector and civil society outlook on mining fiscal policies and administration;
  • Human resources, institutional collaboration, coordination, capacity building, and information sharing, and
  • Experience sharing from selected countries including Burkina Faso, Ghana, Mali, South Africa, Tanzania and others.

In an attempt to address these challenges and bridge these gaps, the World Bank’s Oil, Gas and Mining unit looked into “How to Improve Mining Tax Collection Administration Frameworks”.

A draft note by the World Bank now provides a structured approach to assist the relevant units of Ministries in charge of Finance and Mines to analyze and improve their effectiveness and efficiency in handling common issues and challenges that arise in the administration of the collection of various elements of mining fiscal regimes, including some of the organizational, structural and resourcing difficulties generally encountered in overcoming them.

The draft note was based on information collected in Burkina Faso, Ghana and Mali and complemented with key elements from good practices in mineral tax collection administration procedures and processes found in other developed countries such as Australia.

The event, held on September 13-14 in Accra, provided a unique opportunity to exchange views on this note, and on the principles of an efficient mining tax administration in the West Africa region.

Opening the workshop Ghana’s Minister of Lands and Natural Resources, Mike Allen Hammah, said the mining industry has contributed significantly to the growth of Ghana’s economy even though several challenges remain to be overcome.

Hammah explained that it was critical to improve the tax regime in Ghana in order to maximize the impact of mining in people’s lives and fully integrate the mining sector with the rest of the economy.

Broad participation

More than 100 delegates from the ministries responsible for mining and tax administration from various countries, as well representatives of regional organizations and mining companies operating in West Africa participated in the event. Some of the countries represented were: Burkina Faso, Cote d’Ivoire, Ghana, Guinea, Liberia, Mali, Niger, Nigeria, Sierra Leone and Togo in West Africa; but also Tanzania and South Africa.

Participants at Workshop in Ghana, 2012
Participants at the end of the Improving Mining Tax Administration Frameworks Workshop

"We thank the World Bank for associating civil society organizations to this mining tax workshop,” said Souleymane Zeba, Director of Oxfam for West Africa. “It made us realize that most officials face significant capacity constraints related to mining tax collection administration. To address those challenges States should deploy better governmental leadership, starting by a serious review of the prevailing economic model that restricts mineral-owners only to mere tax perception on raw mining product.”


Boubacar BocoumIt is fundamental to build technical capacity in extractive industries financing and accounting so that people working in these areas can better understand the information, manage risks, forecast budget contributions from the sector adequately, and foster compliance with established mineral policies. ||
 Boubacar Bocoum, Lead Mining Specialist, The World Bank

The World Bank is leading or participating in a number of initiatives aimed at realizing the growing global expectation that extractive industries should contribute positively to long-term national and local economic development. Improving and/or strengthening mining tax collection administration is a part of these broader efforts.

“Countries normally focus on policies to attract investment but rarely on building the capacity to effectively implement those policies,” explained Boubacar Bocoum, in charge of this project and lead mining specialist with the Bank’s Oil, Gas and Mining unit. “It is fundamental to build technical capacity in extractive industries financing and accounting so that people working in these areas can better understand the information, manage risks, forecast budget contributions from the sector adequately, and foster compliance with established mineral policies.”




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