Taxes and royalty revenues derived from exploration, mine development and mining reflect the value to society of the resources mined. They are collected and put to work in support of the sustainable development of the nation.
To this end, governments should consider:
The implementation of a revenue generation (taxation and royalties) scheme that:
- Optimizes the return from the mining activity and the taxation agreements achieved with foreign and domestic investors in a manner that reflects the different realities they face;
- Maximizes resource levy revenues to society during times of high prices, while minimizing the need for entities to reduce or end production during times of low prices, and supporting a variety of sustainable development objectives; and
- Seeks to integrate the mineral sector with other sectors of the economy so as to optimize the contributions of the mineral sector.
A mining policy that:
- Maintains sufficient flexibility to ensure that a balance is achieved between optimizing revenue from mining activities while permitting the mine developers and operators an adequate rate of return on their investment;
- Uses national corporate income taxes based on net profits as the common element for large- and small-scale commercial mining; and
- Applies such taxes in the same manner as to non‐mining entities within a jurisdiction but with the potential for allowances specific to mining for defined expenditures and/or accelerated deductions to achieve specific public policy aims.
The need for human and intellectual resources to manage the sector such that:
- There is adequate governmental capacity to negotiate the financial terms and conditions of mineral development agreements, to administer the tax system and the agreements, to deal with transfer and other pricing issues, and to audit the results;
- There is knowledge of how mineral development agreements are developed in other jurisdictions and the degree to which they are serving national objectives. Domestic competence in these matters should be considered a priority and, as necessary, be supplemented with independent third-party expertise.
The integration of fiscal instruments and policy objectives such that:
- All negotiations on mineral development agreements and licenses should take into consideration national policy objectives and how the agreements can support them.
Addressing the issue of the distribution of benefits by:
- Providing open and transparent data on tax and royalty flows and how the benefits have been distributed at the local, regional and national levels. Governments may wish to consider how to benefit from initiatives such as the Extractive Industries Transparency Initiative (EITI); and
- Using different mechanisms to maximize the transparency, understanding and acceptance of how the direct financial flows from mining operations are apportioned in ways that are appropriate to their political and legal systems.