Reference : Profit taxation and royalties: evidence from gold mines in Sub-Saharan Africa

	Document type :	E-prints/Working papers : First made available on ORBilu
	Discipline(s) :	Business & economic sciences : Economic systems & public economics
	To cite this reference:	http://hdl.handle.net/10993/44012

Title :	Profit taxation and royalties: evidence from gold mines in Sub-Saharan Africa
Language :	English
Author, co-author :	Bertinelli, Luisito [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
	Bourgain, Arnaud [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
	Zanaj, Skerdilajda [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Publication date :	Dec-2019
Edition :	December
Collection and collection volume :	CREA Discussion Papers
Number of pages :	21
Peer reviewed :	Yes
Keywords :	[en] Resource countries ; Resource taxation ; Royalties ; Cost misreporting ; Extractive in- dustries
Abstract :	[en] In this paper, we analyze theoretically and empirically the effects of tax changes on firms’ profits in extractive industries. In the theoretical part, we assume a country that levies a profit tax and a royalty on the profits of extractive firms to maximize its tax revenues. The mining companies may reduce their taxable income by cost manipulation. By analyzing the optimal choice of the government and of the firms, we first establish the optimal tax policy and then we investigate the impact of the optimal fiscal policy on firms’ profits. In the empirical part of the paper, we estimate the effect of the profit tax and royalty on the extracting firms’ profit in African countries during the period spanning from 2007 to 2018. We use the Mining Intelligence database to constitute a panel of annual individual data from a database of 363 gold mines located in 21 Sub-Saharan countries. We obtain an inverse relationship between the tax rate change of the two tax instruments and the profit of the firms.
Target :	Researchers ; Professionals ; Students
Permalink :	http://hdl.handle.net/10993/44012

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