Tax Breaks for Mining Companies must stop

Karl FitzgeraldCommentaryLeave a Comment

Creative Commons License photo credit: Rui Almeida (Portugal)

Those who read our recent post on Papau New Guinea will find this important reading. A new report entitled Breaking the Curse: How Transparent Taxation and Fair Taxes can Turn Africa’s Mineral Wealth into Development. The conglomerate of aid agencies behind the report state:

For example, Zambia’s mining law allows the minister in charge to give mining rights to a company without consulting anyone. “Surely the minister is open to corruption because these contracts are not subject to any form of scrutiny. This paves way for non-transparent transactions,” a senior official in the country’s environment ministry told IPS on condition of anonymity.

Similarly, the report is critical of mining laws adopted under pressure from the World Bank, which pushed for low tax rates to attract foreign investment in mining. “African governments have enacted laws giving tax subsidies to the industry and mining companies have been pushing for tax breaks in secret mining contracts, amounting to an aggressive tax avoidance strategy,” says the publication.

It cites Ghana and Tanzania, where low royalty rates cost treasuries 68 and 30 million dollars respectively in 2008. For South Africa, the figure is 359 million.

Tax breaks granted in Malawi cost the treasury 16.8 million dollars; in Sierra Leone eight million. The tax exemption on a single mining contract in the DRC may have cost the treasury 360,000 dollars a year.

“The same governments continue to borrow almost to alcoholic proportions from the developed world; they borrow in order to finance education, water and sanitation. They borrow actually to provide basic services,” observed Brian Kagoro, the policy manager for ActionAid International.

Let’s hope more stakeholders read Fred Harrison’s The Silver Bullet, on sale at our bookshop for just $20.

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