Taxation Mining And The Severance Tax

This Bureau of Mines report summarizes State severance taxes imposed on minerals and mineral fuels, provides a hypothetical example of how a State severance tax affects selected components of a firm's income statement, and uses the Bureau's Minerals Availability System (MAS) to estimate the effect of assumed changes in State severance tax rates on copper recovery cost at given levels of potential copper availability. A reduction of the rates to zero or a doubling of them results in changes in costs that are of the same order of magnitude as the cost of transporting copper to the United States from major foreign producing countries.

Mali’s gold sector is an enclave with weak forward and backward linkages with the rest of the economy. Given the predominance of the fiscal transmission channel, it is important that the design of the mineral tax regime gives the state a fair share of the benefits. Using optimal control theory, this paper estimates that the optimal royalty tax in Mali is about 3.5 percent. By reducing the royalty rate from 6 percent to 3 percent, Mali’s mining code broadly ensures that the risk is shared between the state and mining companies, provides sufficient incentives to attract new exploration, and is comparable to the fiscal regimes in other sub-Saharan African countries in its mix of tax instruments and tax structure.

How should governments manage their countries mineral and oil-gas resources? This book deals with the relationships between governments and mining companies; governments participation in mining enterprises; stabilization in the face of fluctuating mineral revenue; and possible forms for tax systems and their administration.