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Unlocking Prosperity: Tax Principles for Sustainable Mining

5 June 2024

This briefing paper, sets out tax policy principles and six tax design elements that support responsible mine development and optimise the benefits of mining for host citizens.

  • It is estimated that by 2030, the required investment to meet demand for the minerals and metals needed for the global energy transition will be between US$360-450 billion. Investment in mineral-rich countries will be critical, supported by stable tax environments that help countries unlock their economic potential and drive wider development.
  • Governments worldwide are grappling with a range of public policy considerations which shape the tax frameworks governing the mining industry. They need to achieve a balance between their national revenue objectives and expected investment returns across the entire life cycle of a mine, while ensuring citizens feel the benefit of mining.
  • The level and mix of taxes must be carefully structured to incentivise the significant upfront capital commitment on a long-term, potentially risky venture where revenue and profit is not always guaranteed.
  • The report outlines six tax design elements that influence cashflows, confidence and required levels of return necessary for responsible mining investment for the energy transition:
  1. Royalty payments – Provide a balanced outcome with the tax base tied as closely as possible to the point of extraction.
  2. Corporate income tax – A well-designed corporate income tax system provides both government, investors and communities a share of economic benefit with potential upside.
  3. Deductions and incentives – Encourage ongoing investment, recognising all types of costs incurred through the mining lifecycle.
  4. International competitiveness – Have a stable and predictable investment environment which requires a holistic evaluation of geological prospectivity, geopolitical and fiscal stability, together with the overall tax burden.
  5. Fiscal stability – Provide reassurance of long-term predictability of tax and fiscal regimes, without sudden or retrospective changes.
  6. Administration and transparency – Provide timely tax relief for mining-related expenditures through the investment cycle. They should promote trust, an investment positive environment and tax certainty.
  • These tax design elements have been applied to three different scenarios across Latin America, Africa and Canada, US and Australia to show how by using different tax levers, governments can foster productivity and an effective investment environment. These scenarios were modelled by EY.
  • The findings emphasises that there is no ‘one-size fits all’ approach to tax policy. Dialogue and collaboration between governments and miners is imperative.
  • The report does not prescribe specific tax regimes of a reform agenda but rather an analysis of different leading practice tax policy design elements and the possible social and economic gains of applying them.
  • Competitive, flexible, and stable tax settings should be able to stand the test of time and be capable of adapting to developing circumstances, fluctuating markets, and a changing world.