Non-Metallic Mining: Building the case for tailored tax and royalty regimes

The report argues that non-metallic minerals—such as sand, gravel, and potash—differ from metallic minerals due to lower revenue potential, stronger domestic economic linkages, and a lack of benchmark prices for many varieties. It proposes a typology for royalties and transfer pricing based on a mineral's export propensity, price volatility, and the availability of benchmark prices. Key recommendations include using unit-based royalties for low-value construction materials to minimize administration costs, and ad-valorem royalties for high-value exports like graphite and potash to maximize revenue. The document also addresses cross-cutting issues such as environmental taxation, the formalization of artisanal mining through lower tax burdens, and the risks associated with tax incentives and export restrictions.

• Non-metallic mining generally has lower revenue potential than metallic mining, which may make complex tax regimes administratively inefficient. An estimate of the annual value of non-metallic mineral output is USD 217 billion across 66 countries, which is less than one-seventh of the estimated USD 1.6 trillion in total annual mining output for those same countries.
• Non-metallic minerals are predominantly used by domestic industries rather than exported, meaning taxes that increase production costs (like royalties) can negatively impact downstream sectors such as construction. Exceptions include graphite, potash, and natural barium sulphate (baryte), which have higher international trade shares.
• Tax avoidance by multinational corporations and trade misinvoicing are generally less concerning in non-metallic mining than in metallic mining because the sector is often dominated by local firms and has lower value-to-weight ratios. However, 42% of IGF members polled believe tackling tax avoidance and evasion should be a priority in fiscal regime design.
• Benchmark prices are unavailable for many non-metallic minerals, including clay, marble, granite, gravel, gypsum, limestone, and sand, limiting the ability of governments to verify reported sales values. Conversely, benchmark prices exist for minerals such as borates, phosphate rock, potash, and sulphur.
• The report suggests different royalty approaches based on mineral type: unit-based royalties are recommended for minerals with low price volatility or low revenue potential (e.g., sand and gravel), while ad-valorem royalties are more appropriate for high-value exports where revenue maximization is the priority (e.g., semi-precious stones, graphite, and potash).
• For transfer pricing, the report suggests that while the Comparable Uncontrolled Price (CUP) method is standard, the 'Sixth Method' (using published benchmark prices) or 'safe harbour' rules may be more efficient for non-metallic minerals to reduce administrative burdens.
• To encourage the formalization of artisanal mining and displace criminal gangs, governments should keep the overall tax burden low. Recommendations include applying reduced royalty rates or exemptions for artisanal miners, as seen in Ecuador and Sierra Leone.
• Tax incentives in the mining sector often fail to boost total investment or economic growth and can lead to 'high grading,' where companies produce the highest value ores rapidly to maximize benefits during a tax holiday.
• Export restrictions or taxes on raw materials intended to spur domestic processing are generally viewed as economically harmful unless the producing country holds significant market power, which is rare for most non-metallic minerals.
• Technological solutions, such as laser scanning of trucks leaving quarries, can significantly improve the monitoring of production volumes and increase government revenues. The Africa Centre for Energy Policy estimates such technology could increase quarry revenues by a factor of 15.

APA

International Institute for Sustainable Development (2025). Non-Metallic Mining: Building the case for tailored tax and royalty regimes. https://www.iisd.org/system/files/2025-10/tax-non-metallic-minerals.pdf

Chicago

International Institute for Sustainable Development. Non-Metallic Mining: Building the case for tailored tax and royalty regimes. 2025. https://www.iisd.org/system/files/2025-10/tax-non-metallic-minerals.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Non-Metallic Mining: Building the case for tailored tax and royalty regimes |date=October 2025 |url=https://www.iisd.org/system/files/2025-10/tax-non-metallic-minerals.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2025nonmetallic, author = {{International Institute for Sustainable Development}}, title = {{Non-Metallic Mining: Building the case for tailored tax and royalty regimes}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = oct, url = {https://www.iisd.org/system/files/2025-10/tax-non-metallic-minerals.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }