Insights on Incentives: Tax competition in mining

The report analyzes 104 mining projects across 21 countries, finding that while incentives are more common in primary law than in contracts, African countries rely more heavily on contract-based incentives. Tax stabilization and corporate income tax (CIT) incentives are the most frequent, with stability periods averaging 20 years and tax holidays averaging nine years. The analysis notes a correlation between the increase in incentives and the commodity price crash of 2014–2016, while highlighting that cost-based incentives remain uncommon despite being better suited for mining investments.

• Governments generally grant more tax incentives through primary legislation than through individual contracts. This is viewed positively as laws are public and subject to legislative review, whereas contracts are often "discretionary, secret and vulnerable to corruption". However, African countries exhibit a higher tendency to grant contract-based incentives compared to countries in Asia and Latin America.
• The most prevalent incentives are those related to corporate income tax and tax stabilization. These are identified as high-risk; income tax holidays may encourage investors to shift profits offshore or accelerate production during tax-free periods, while broad stability provisions can prevent governments from correcting revenue losses.
• Withholding tax incentives are common and present significant risks regarding base erosion and profit shifting (BEPS). By reducing or exempting withholding tax on royalties, management fees, or interest, countries create incentives for investors to "strip profits out of the mine" and transfer them to foreign affiliates in low-tax jurisdictions.
• Cost-based incentives, such as tax credits and investment allowances, are rarely used, with only the Philippines, Mongolia, and Colombia offering them in law. The report argues these are superior to profit-based incentives because they are easier to monitor and allow taxpayers to recoup investments without depleting early-stage cash flows.
• Royalty-based incentives, including deferred or reduced royalties, are frequently found in contracts but are rarely included in primary law. This is noted as concerning because royalties are payments for extracting public resources, and waiving them removes a predictable revenue stream.
• Tax stability clauses are nearly universal, with an average duration of 20 years. In some countries—including Mali, Madagascar, Burundi, Burkina Faso, and Guinea—these periods average 30–34 years, which the report suggests may transform them into "rent-seeking tools" rather than necessary financial assurances.
• Corporate income tax holidays are offered by more than half of the surveyed countries, with an average length of nine years. These are described as inefficient because mining is location-specific and the most profitable projects benefit the most. In the Democratic Republic of Congo, one recorded tax holiday was not time-limited.
• The frequency of mining tax incentives fluctuates with global economic conditions. Use peaked in the late 1990s and rose sharply again following the 2014–2016 commodity price crash, as countries felt pressure to attract investment. Conversely, incentives declined between 2010 and 2013 during a period of high commodity prices.

APA

International Institute for Sustainable Development (2019). Insights on Incentives: Tax competition in mining. https://www.iisd.org/system/files/publications/insights-incentives-tax-competition-mining.pdf

Chicago

International Institute for Sustainable Development. Insights on Incentives: Tax competition in mining. 2019. https://www.iisd.org/system/files/publications/insights-incentives-tax-competition-mining.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Insights on Incentives: Tax competition in mining |date=2019 |url=https://www.iisd.org/system/files/publications/insights-incentives-tax-competition-mining.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2019insights, author = {{International Institute for Sustainable Development}}, title = {{Insights on Incentives: Tax competition in mining}}, institution = {International Institute for Sustainable Development}, year = {2019}, url = {https://www.iisd.org/system/files/publications/insights-incentives-tax-competition-mining.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }