Join our webinar and be first to access IGF’s new dataset of mining tax incentives in over 20 countries – the most granular view of tax competition in the mining sector yet!
The webinar will take place on Wednesday, July 17, at 10:00 a.m. EST / 4:00 p.m. CET.
Resource-rich countries must compete to attract mining investment. There is limited capital worldwide, and as such, investors are weighing opportunities according to the quality and location of the resource, and policy environment. There is a risk, however, that in competing for investment, countries offer unnecessary or badly designed tax incentives, leading them to forgo vital revenues in exchange for often illusive benefits.
A tax holiday is one such incentive that is likely to have limited impact on investment decisions and is extremely costly for government. Yet, in a review of mining tax incentives in 21 countries, IGF finds that more than half offer a complete exemption from corporate income tax for nine years on average. Tax holidays are particularly common in African countries, which are also more likely to grant incentives in mining contracts than the primary law, raising concerns about the potential for corruption.
Tax incentives may also illicit behavioural responses by industry that increase the cost to government. Continuing with tax holidays, investors may speed up the rate of production in order to push all their income into the tax-free period. The result is that the amount of tax relief is well above that originally envisaged by government. Join us as we quantify this, and other risks to revenue using the IGF open source financial model.