Taxation of natural resources; what’s the way forward for Africa?

 

A succinct analysis of the literature concerning the notion of taxation of natural resources discloses several loopholes on the part of African Countries. These loopholes are policy-based, moral, and institutional in nature. At a moral level, African leaders are deeply interested in their personal needs; this makes them vulnerable to bribes and corrupt tendencies. In Zambia, several tax concessions were offered to Acacia Mining Company in return for donations given by the British Government. Other corporations such as Sino Metals, and China Non-Ferrous Mining Corporation used petty deception and were able to obtain tax concessions in the extraction of copper which greatly reduced the tax revenues to which Zambia was entitled. 

The other moral issue concerns the role played by several actors including politicians, auditors, lawyers, local bandits, local tax advisors, and bureaucrats that greatly influence tax governance through threats, lawsuits, and assassination attempts on the part of leaders who chose the principled path in negotiating these contracts and pursuing honesty and dignity. CNOOC officials have been implicated in this scheme of donating gifts to African leaders, In other cases, honest leaders such as Alpha Conde have had death attempts while in extreme cases some prominent leaders have been killed. 

In Tanzania, the returns on copper mining have been significantly low; the gaps in the legal framework where laws are overly in favor of the mining companies. This has led to tax evasion, due to their insistence on taxing profits that are never disclosed by these mining companies. There is a need to increase their tax audit capabilities and involvement in the administration of mining activities. Unfavorable terms in pre-existing contracts must be renegotiated, and the legal regulatory framework must target taxing revenue, not highly elusive profits. 

The taxation of foreign workers must be given a top priority and an import duty levied on the equipment that these mining corporations use in taxation. The natural resource contracts must be open to public scrutiny to bolster accountability and transparency; The available literature discloses that Uganda has kept a great proportion of its Production-sharing Sharing Agreements (PSAs); there is no justifiable reason as to why such information must be kept off the public despite the presence of various laws requiring such information to be publicly disclosed. 

The concerns with taxes and royalties must be addressed through direct government involvement; African Countries must retain shares in these mining industries so that they can direct the way information is reported for purposes of taxation but also to direct and influence policy as far as the extraction of natural resources and taxation of the same is concerned. The issue with institutional weaknesses that thwart the African governments' abilities to track, assess, and tax these resources must be given due attention. 

This is the core of the problem; a weak institutional framework will involve an incompetent judicial system, a weak tax administration system, a poor legislative and legal framework, a poor policy framework, and a general inability to implement policies regarding taxation. To ameliorate the above, African countries must invest in their education, and open careers to talent so that the best person takes the job as opposed to tribal and parochial approaches used by the modern African leaders.