INCITATIONS FISCALES DANS L’INDUSTRIE MINIÈRE : LIMITER LES RISQUES POUR LES RECETTES

This guidance note, published by the International Institute for Sustainable Development (IISD) in 2018, provides a framework and a financial model for governments to estimate the direct and behavioral costs of tax incentives in the mining industry. It emphasizes that investors may alter their behavior to maximize financial gains from incentives, leading to unforeseen revenue losses for the state.

• The document proposes a four-step framework to estimate total revenue loss from tax incentives: first, estimating revenues under a reference tax regime; second, calculating the direct cost of incentives; third, estimating the cost of behavioral responses; and finally, summing the direct and behavioral costs.
• The Intergovernmental Forum on Mining, Minerals, Metals and Metals (IGF) provides a financial model, compliant with the FAST standard and under a CC BY-SA 4.0 license, pre-configured for a representative medium-sized open-pit gold mine in Sub-Saharan Africa.
• Direct costs of tax incentives are not always additive; combining multiple incentives can lead to higher revenue losses due to interdependence and the erosion of the tax base. For example, combining an import duty exemption, a 10-year tax holiday, and a withholding tax exemption on dividends resulted in a combined cost of 106.6 million USD, which is higher than the sum of their individual costs (87.9 million USD).
• Behavioral responses can significantly increase the cost of tax incentives. In one example, a 10-year corporate income tax holiday had a direct cost of 23.4 million USD, but 'high-grading' (increasing the cut-off grade to accelerate production) added another 23.5 million USD in behavioral costs, nearly doubling the total loss to 46.9 million USD in real terms.
• Exemptions from withholding tax on interest can incentivize investors to engage in excessive interest deductions by increasing debt levels and interest rates. In the provided model, this behavioral response increased the cost of the exemption from a direct cost of 6.4 million USD to a total revenue loss of 49.0 million USD in real terms.
• Progressive royalties using an 'aggregated structure' can create 'dead zones' where buyers and sellers are incentivized to under-invoice ore sales to stay just below a higher royalty threshold. Monte Carlo simulations in the model showed a mean behavioral cost of 4.7 million USD, with a maximum observed cost of 115.8 million USD (26.4% of reference revenues).
• The document recommends using scenario modeling (base, best, and worst cases) and sensitivity analysis (varying one parameter, typically the commodity price) to test the robustness of cost estimates and identify extreme risks.
• Tax incentives are considered 'well-targeted' if their cost increases when mine performance is low (e.g., in the worst-case scenario or during price drops), supporting marginal investments. Conversely, incentives based on profits or revenue (like tax holidays) are often 'poorly targeted' because their cost increases when the mine is most profitable and the incentive is least needed for viability.
• To isolate the individual contribution of multiple combined incentives, the document suggests a sequential estimation method presented in a 'comparative sheet,' where each subsequent incentive is added to a reference regime that already includes the previous ones.

APA

Steel, I. (2018). INCITATIONS FISCALES DANS L’INDUSTRIE MINIÈRE : LIMITER LES RISQUES POUR LES RECETTES. International Institute for Sustainable Development. https://www.iisd.org/sites/default/files/publications/tax-incentives-in-mining-minimising-risks-to-revenue-guidance-fr.pdf

Chicago

Steel, Iain. INCITATIONS FISCALES DANS L’INDUSTRIE MINIÈRE : LIMITER LES RISQUES POUR LES RECETTES. International Institute for Sustainable Development, 2018. https://www.iisd.org/sites/default/files/publications/tax-incentives-in-mining-minimising-risks-to-revenue-guidance-fr.pdf.

Wikipedia

{{cite report |last1=Steel |first1=Iain |title=INCITATIONS FISCALES DANS L’INDUSTRIE MINIÈRE : LIMITER LES RISQUES POUR LES RECETTES |publisher=International Institute for Sustainable Development |date=2018 |url=https://www.iisd.org/sites/default/files/publications/tax-incentives-in-mining-minimising-risks-to-revenue-guidance-fr.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{steel2018incitations, author = {Steel, Iain}, title = {{INCITATIONS FISCALES DANS L’INDUSTRIE MINIÈRE : LIMITER LES RISQUES POUR LES RECETTES}}, institution = {International Institute for Sustainable Development}, year = {2018}, url = {https://www.iisd.org/sites/default/files/publications/tax-incentives-in-mining-minimising-risks-to-revenue-guidance-fr.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }