One of the central challenges many African countries face relates to their capacity to put in place an effective framework to collect a fair level of mineral revenues in the form of mineral royalties and other mining-related taxes aligned to contractual agreements and in so doing set the stage for a potential use of mineral revenues for sustainable development. An improved revenue-collection framework would entail clear identification and strengthening of different levels of administrative capacity required to enforce various tax instruments, followed by the development and setting up of effective and co-ordinated, physical and financial control systems for the two key institutions managing the mining sector i.e. the Ministries in charge of Finance and Mining. It has been estimated that if the correct amount of mining taxes were to be collected in Africa in line with existing legislation it would be sufficient to offset the significant amount of aid currently directed to the continent.
Retention of CET by the World Bank (WB), with recent financial support by International Mining for Development Centre (IM4DC) and the German foreign aid agency Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ), to address these challenges is now entering its fifth year and covers the following phases:
PHASE 1 2012-13
Formulation of a framework for the strengthening of the mineral tax administration capacity of Governments (Ministry of Mines and Ministry of Finance) in Africa to ensure compliance with mineral development contracts and the general fiscal regimes. Based on mapping of the current physical and financial controls for mineral revenue collection (royalties and other mining-related imposts), including assessment of capacity and institutional constraints and risks in three West African countries (Burkina Faso, Mali and Ghana), the WB and CET have recently published a Source Book on “How to improve mining taxation administration and collection frameworks
The above practical “how-to
” Source Book and related comprehensive survey questionnaires represented the basis for the delivery of a number of international workshops to improve mineral tax compliance conducted in Africa to train key units in the Ministries of Finance and Mines involved in mineral tax collection. The first workshop was successfully completed in Ghana in September 2013, followed by one in South Africa in February 2014, in Tanzania in May 2014 and in Ethiopia in September 2014.
PHASE 2 2014-15 Completed -
A research study has been conducted in the complex area of transfer pricing (TP) as applied to transactions between related parties in the context of mining in Africa. Corporate re-structuring by multinational enterprises (MNEs), shifting profits from mineral-rich countries to tax havens thus eroding their tax bases, has created opportunities for tax avoidance through potential misuse of TP used in cross-border transactions between related entities of the same MNE; a major area of concern, in developing and developed countries alike. This study has drawn knowledge from both public taxation authorities and specialised academics and international accounting firms. An Interim Progress Report, titled "Transfer Pricing in Mining: An African Perspective
", was compiled and released in time for the G20 meeting which took place in Brisbane in November 2014. The final results of this study have been captured at the conclusion of this project phase in a draft of a book entitled “Transfer Pricing in Mining with a Focus on Africa: A Reference Guide for Practitioners
”. The draft was edited by TP specialists at the WB and reviewed by 3 external TP specialists before being cleared for publication. This Guide book is intended to be of practical relevance to the needs of tax practitioners in mineral-rich developing countries, assisting in their progressive development and implementation of good TP policy, rules, systems and procedures.
PHASE 3 2015-16
Supported by GIZ’s funding, following final editing and pagination the TP Guide book was published in English jointly by the WB, the CET and MEfDA (the successor to IM4DC) in January 2017 and it is planned that it should also soon be translated into French.
A summarised version of the TP Guide book, in the form of a “Briefing Note”, designed to inform a different, less specialised audience of decision-makers and stakeholders has also been drafted and published. This Transfer Pricing Summary Briefing Note is targeted to politicians, the media, civil society and non-government organisations with an interest in mining taxation.
In addition, a comprehensive suite of appropriate training material was developed to support together with the TP Guide book a range of specialised international training workshops to be conducted during 2017 in various developing countries in Africa and elsewhere.
PHASE 4 2016-17
– Taking advantage of funds from GIZ and from the African Mineral Development Centre
(AMDC) part of the United Nations Economic Commission for Africa
(UNECA), a number of specialised international workshops on “Transfer pricing in mining”, targeted at government officers involved in mining taxation from the ministries of Finance and Mines, have been planned to take place in a number of African and Latin American countries. The possibility of running similar workshops in Asia is also currently being considered. To date workshops will be run in Tanzania with AMDC’s funds and Panama with GIZ-WBG’s funds in March 2017 and in Mozambique with AMDC’s funds in April 2017. Given adequate funding support it is also intended that the training material should be upgraded to make it capable of supporting remote web-based tuition.