Fiscal Regimes

8. Administration: Improving revenue collection

Collecting revenues from extractive industry projects depends less on the design of the fiscal regime than on the effectiveness with which it is administered. Given the typical asymmetry in resources between developing country governments and multinational companies, it is unsurprising that states often lack the capacity to collect what is due.

Improving revenue collection from the sector often can mean not only tackling issues specific to extractives, but also enhancing tax administration for the entire economy.

Institutional options for revenue administration

Institutional arrangements set out who is responsible for administering the fiscal regime and collecting revenues. Typically, a semi-autonomous revenue authority reporting to the Ministry of Finance, will hold primary responsibility for revenue collection. They will be responsible for auditing taxpayers to ensure they comply with the rules and regulations.

However with extractive industries, the Ministry or Agency responsible for overseeing the sector is important as, for example, they have the sector expertise required to analyse and verify reported production and exports.

They can also contribute to revenue collection by physical auditing (including geo-testing) of resources to verify the quality and quantity of resources.

Tanzania: Specialised agency links physical and financial auditing

Some countries have chosen to establish a single agency tasked with both physical and financial auditing of extractive industry operations. Tanzania did that with the Mineral Audit Agency.

Establishing a single extractives audit agency can make the link between financial auditing and physical auditing of the volume and value of resources much easier, instead of splitting them between the revenue authority and sector ministry as is common elsewhere.

How mineral auditing is conducted in a selection of countries

This table shows how mineral auditing is conducted in a selection of countries.