ICMM - International Council on Mining & Metals

PROJECTS

Minerals Taxation

A review of issues and challenges in the design and application of minerals taxation regimes

A multi-stakeholder consultation on the Resource Endowment initiative, held at the Brookings Institution, Washington DC in June 2006, revealed a gap in the project’s work to date on the subject of minerals taxation. At the meeting it was noted that the design of tax regimes is a major factor influencing whether, and to what extent, mineral revenues help to drive social and economic development.

Following the meeting a review was commissioned to look at issues and challenges in the design and application of minerals taxation regimes. Due to the sensitive and controversial nature of the subject, ICMM sought to ensure the independence and credibility of the report at each stage of the process.

An external advisory board was appointed to oversee the process, comprising four international experts on the subject of minerals taxation: Philip Daniel (IMF), Tom King (KPMG), Ted Moran (Georgetown University) and Jim Otto (University of Denver). Initially this group provided input into the Terms of Reference (TOR), which feature as an appendix to the final report. Following agreement of the TOR, the review was then put out to tender in an open and transparent bidding process. The independent consulting firm that was appointed to undertake the work, Oxford Policy Management (OPM), had been involved in several earlier aspects of the Resource Endowment initiative.

Once the review was underway, the advisory group provided source material to the report’s authors and was consulted throughout the process, but had no direct hand in its writing.

A draft of the report was completed in March, 2008 and was distributed for feedback from the advisory group as well as from ICMM member companies. At a meeting in May, 2008, tax experts from several ICMM companies provided further input into the report. Olle Ostensson from the United Nations Conference on Trade and Development also provided written feedback at this stage. All written comments are included as an appendix to the report, including the authors’ responses to the feedback.

Prior to publication, the four members of the advisory group provided commentaries on the process and content of the report, and these commentaries feature in the preface. The report will be published in late 2008. In parallel, a supplement on minerals taxation will be added to the Resource Endowment toolkit, a practical framework designed to help evaluate the outcomes of mining investments, which has been applied in Ghana, Tanzania, Peru and Chile. As part of the minerals taxation review, two ‘spotlight’ documents have been produced. The first (spotlight 10) acted as a preliminary overview of the subject prior to the commissioning of the report, and the second summarizes the report’s findings.

In terms of its approach, the review started from the premise that while tax regimes are an important determinant of mining investment, development outcomes from mining depend on a broader set of factors, including governance arrangements, and the choices made by governments in allocating the revenues.

Following an analysis of the strengths and weaknesses of different structures of minerals taxation regimes, and perspectives on minerals taxation from ICMM member companies, the review concludes with a number of observations (as distinct from recommendations) on the design and application of minerals taxation regimes. One clear message emerging from the report is that there is significant room for agreement between companies and governments – provided that both adopt a long-term perspective. In particular, both parties have an interest in taxation regimes that are widely perceived to be legitimate.

The report’s main author is Evelyn Dietsche (Centre for Energy, Petroleum and Mineral Law and Policy - CEPMLP and OPM Associate) supported by Tim Ruffer (OPM) and with research assistance from Ousmane Cisse (CEPMLP). The team was supported with advice from Alan Roe (OPM), Matthew van der Want (Webber Wentzel Bowens) and Roger Davis (freelance consultant). 

The study was overseen and managed by Kathryn McPhail at ICMM. It was published in March 2009.