Taxing the extractives: Revenue sharing between the state and mining companies in Tanzania and Zambia

Abstract

The resource curse consists of a contrast between resource richness and poor growth and development patterns. This paper investigates the resource revenue sharing between the state and mining companies in Tanzania and Zambia during the commodity boom period from 2000 to 2013. By using data from the national and sector levels, estimates of relative shares of contribution to value added, export and revenues are examined, together with major company level estimates of average effective tax and net present values. From this the author shows to what extent Tanzania and Zambia achieved an effective government take in the period analysed. The study finds that in both countries there were weaknesses in the design and enforcement of the mining tax regimes that have reduced the government take. Tanzania and Zambia both could have doubled annual mineral revenues from 2008-2013, representing USD 80 and 300 million per year respectively, while maintaining competitive conditions and returns for the mining companies. Major policy recommendations include the need to combine evidence-based tax instruments both in contract and legislation, and to invest and support through the administration as well as politically the role and legitimacy of specialized government enforcement capacities and institutions over time.