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Business and Economics > Corporate Taxation

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Cover IMF Staff Country Reports
Guinea: Selected Issues
International Monetary Fund. African Dept.
Selected Issues
Keywords:
B. mining revenue; revenue management; tax exemption; A. mining revenue; company Cost Structure; Mining sector; Oil; gas and mining taxes; Corporate income tax; Transfer pricing; Natural resources; Asia and Pacific; Global
Cover IMF Staff Country Reports
Guinea: Selected Issues
International Monetary Fund. African Dept.
Selected Issues
Keywords:
B. mining revenue; revenue management; tax exemption; A. mining revenue; company Cost Structure; Mining sector; Oil; gas and mining taxes; Corporate income tax; Transfer pricing; Natural resources; Asia and Pacific; Global
Cover IMF Working Papers
Is There Money on the Table? Evidence on the Magnitude of Profit Shifting in the Extractive Industries
Sebastian Beer
Profit shifting remains a key concern in international tax system debate, but discussions are largely based on aggregate estimates, with less attention paid to individual sectors. Drawing on a novel dataset, we quantify tax avoidance risks in the extractive industries, a sector which is revenue critical for many developing economies. We find that a one percentage point increase in the domestic corporate tax rate has historically reduced sectoral profits by slightly over 3 percent; and the response tends to be more pronounced among mining than among hydrocarbon firms. There is only weak evidence transfer pricing rules contain tax minimization efforts of MNEs in our sample, but interest limitation rules (e.g., thin capitalization or earnings based rules) do reduce the observable extent of profit shifting. Our findings highlight the challenge of taxing income in the natural resource sector and suggest how fiscal regime design might be strengthened.
Keywords:
International Corporate Taxation; Multinational Firms; Mining; Petroleum; Profit Shifting; Debt; Interest Limitations; Transfer Pricing; Production Sharing Agreements; WP; tax rate differential; taxable profits; CIT base; profits increase; representative firm
Cover IMF Staff Country Reports
Israel: Technical Assistance Report-Reviewing the Fiscal Regime for Mining
International Monetary Fund. Fiscal Affairs Dept.
EXECUTIVE SUMMARY This report is provided to support the work of the ‘Sheshinski II’ committee in reviewing the fiscal regime for mining. Mining is, and will remain, relatively minor both as a source of government revenue and within the wider economy. Nonetheless, it is important that the fiscal regime deliver to the public an appropriate share of the return to the exploitation of resources that they own while also providing investors with a sufficiently attractive and stable environment. To that end, this report reviews principles, experience and tools in mining taxation, bringing them to bear on the analysis of, and suggesting potential improvements to, the current regime. The current use of royalties as the sole and in some cases quite burdensome special fiscal instrument for mining is problematic. One of the primary benefits of royalties—that they ensure some revenue from the start of production—is of limited relevance in Israel, where production is highly mature and exploration minimal. More to the fore is their ineffectiveness in achieving one of the primary goals that warrants a special fiscal regime in the extractive industries: the prospect of designing a charge on rents—returns, that is, in excess of the minimum required by the investor—that can raise revenue without distorting commercial decisions. Their insensitivity to profitability means that royalties not only fail to do this, but, perversely, imply that the government actually takes a smaller share of rents when commodity prices are high; and, conversely, that the company faces a very high effective tax on its profits when those profits are low. Simulations reported here show that these undesirable effects are very marked under the current fiscal regimes. Indeed cutting top marginal royalties-even in the absence of any other reform—would in some cases almost certainly increase both government revenue and after-tax profits. Alternative fiscal regimes—combining a modest mineral-specific royalty with a common profit-based tax—would resolve this structural weakness. The focus of the report is not on the level of the ‘government take’ from minerals—ultimately a political choice—but on how that take varies with the profitability of the underlying investment. To that end, it reports illustrative simulations (for a hypothetical but not unrealistic project) of alternative fiscal regimes that imply the same government take in a benchmark case but respond very different to project profitability. These alternatives combine a relatively low royalty—which may have some merit in protecting the base against tax avoidance through cost manipulation—with four alternative forms of profit-based tax (retaining, in all but one, the current corporate income tax); and consider too the possibility of converting the royalty into, in effect, prepayment of a profit-based tax. These options differ in important ways—in the required statutory rate of the profit tax, transitional issues, and the time path of government revenues. But they all address the key structural problem, providing structures in which the effective tax rate is lower, not higher, for less profitable outcomes. Fiscal regimes of broadly this kind are (increasingly) commonplace in mining, including in major mineral producing countries. The treatment they provide would be similar to, but could be simpler than, that adopted for oil and gas following ‘Sheshinski I.’
Keywords:
ISCR; CR; tax rate; cash flow; transfer pricing; present value; rent tax; income tax; Corporate income tax; Mining sector; Rent tax; Income and capital gains taxes; Non-renewable resources; Africa; Global; Middle East; Southeast Asia; Europe
Cover IMF Working Papers
Resource Blessing, Revenue Curse? Domestic Revenue Effort in Resource-Rich Countries
Ernesto Crivelli
and
Mr. Sanjeev Gupta
This paper uses a newly constructed revenue dataset of 35 resource-rich countries for the period 1992-2009 to analyze the impact of expanding resource revenues on different types of domestic (non resource) tax revenues. Overall, we find a statistically significant negative relationship between resource revenues and total domestic (non resource) revenues, including for the major tax components. For each additional percentage point of GDP in resource revenues, there is a reduction in domestic (non resource) revenues of about 0.3 percentage points of GDP. We find this primarily occurs through reduced effort on taxes on goods and services—in particular, the VAT— followed by a smaller negative impact on corporate income and trade taxes.
Keywords:
WP; resource revenue; resource; taxation; GDP; VAT
Cover IMF Working Papers
Resource Dependence and Fiscal Effort in Sub-Saharan Africa
Mr. Alun H. Thomas
and
Mr. Juan P Trevino
High natural resource prices in recent years have resulted in sizeable increases in fiscal revenue for many resource-exporting countries in sub-Saharan Africa. However, this revenue source is volatile, and arguably these countries should also rely on other forms of taxation to help fund public expenditure. This paper asks whether the availability of higher resource revenue in these countries has led to lower taxation effort of other revenue categories. The question is analyzed both in terms of the relationship between non-resource tax revenue and resource revenue, and between non-resource tax revenue and statutory tax rates. The paper finds evidence suggesting that nonresource revenue is negatively influenced by a higher resource revenue-to-GDP ratio. The lower take up of nonresource taxes in resource-rich countries is correlated with higher levels of corruption in these countries, suggesting weaker institutions affect nonresource revenue through incentives for tax evasion and/or large tax exemptions as argued in the literature.
Keywords:
WP; resource revenue; resource; revenue ratio; resource country; Tax law; taxation; exhaustible resources; resource rich; oil; resource booms; revenue effort; natural resource export; Natural resources; Corruption; Corporate income tax; Value-added tax; Sub-Saharan Africa
Cover IMF Staff Country Reports
Philippines: Reform of the Fiscal Regimes for Mining and Petroleum
International Monetary Fund
This Technical Assistance (TA) Report on the Philippines discusses the fiscal regime for the mining sector. The Philippines has long been a producer of minerals, but the mining and petroleum sectors account for only a small share of the economy, exports, and government revenue. The petroleum sector comprises only two fields—one producing natural gas and condensate and one producing crude oil. The TA report suggests legislative reforms of financial and technical assistance agreements (FTAAs), repealing of tax incentives and consolidating all domestic tax rules, and fostering sound environmental practices.
Keywords:
ISCR; CR; government share; withholding tax; excise tax; fiscal regime; tax revenue; Mining sector; Income and capital gains taxes; Non-renewable resources; Corporate income tax; Oil; gas and mining taxes; Africa
Cover The Taxation of Petroleum and Minerals
The Taxation of Petroleum and Minerals
Principles, Problems and Practice
International Monetary Fund

Abstract

There are few areas of economic policy-making in which the returns to good decisions are so high-and the punishment of bad decisions so cruel-as in the management of natural resource wealth. Rich endowments of oil, gas and minerals have set some countries on courses of sustained and robust prosperity; but they have left others riddled with corruption and persistent poverty, with little of lasting value to show for squandered wealth. And amongst the most important of these decisions are those relating to the tax treatment of oil, gas and minerals. This book will be of interest to Economics postgraduates and researchers working on resource issues, as well as professionals working on taxation of oil, gas and minerals/mining.

Keywords:
BOOK; government; country; economic rent; State participation; rate of return; tax authorities; cash flow; government share; host government; Resource rent tax; Oil; Tax administration core functions; Corporate income tax; Oil sector; Africa; Global; North America; Caribbean; Sub-Saharan Africa
Cover IMF Working Papers
A Primeron Mineral Taxation
Mr. Thomas Baunsgaard
The paper discusses options available to tax mineral extraction projects particularly in developing countries. A desirable government share of the economic rent generated from mineral extraction can be achieved through different tax and non-tax instruments. This gives some room to design a fiscal regime that will be attractive to investors while providing the government with a fair share of the economic rent. However, achieving this will require a careful assessment of the appropriate distribution of risk and reward between the investor and the government. Moreover, there is growing pressure on countries to provide increasingly lenient fiscal terms so as to remain competitive as global investment destinations.
Keywords:
WP; economic rent; tax system; supply price; transfer pricing; cash flow; tax liability; Taxation; mineral tax; mining and petroleum; mineral extraction; developing countries; import duty; progressive tax; opportunity cost; Resource rent tax; Non-renewable resources; Production sharing; Income and capital gains taxes; Corporate income tax; Middle East