A review of mining taxes in Africa : tax burden, the strength of democratic systems and levels of corruption

Background: This article examines features of the tax systems of 19 African countries with material mining operations. Objectives: An interpretive approach is used to explore the implications of a country's commitment to democracy (according to the Economist Intelligence Unit) and perceived levels of corruption (according to Transparency International) for the tax burden experienced in some of Africa's mining industries. The scores are contrast with the strength of the jurisdictions' democratic systems and levels of corruption. Method: Income tax rates, the number of taxes charged and the administrative challenges experienced by taxpayers are used to calculate a composite 'tax burden score' for each country. The scores are compared with the levels democracy and corruption reported by the Economist Intelligence Unit and Transparency International respectively. Results: Results suggest that democracies are just as capable of extracting value from taxpayers as authoritarian regimes where legal or electoral challenges to unfair tax policy are less likely. Authoritarian governments do not, however, always have the highest tax rates. Free from the need to invest in democratic systems and social welfare, taxes are levied at a lower rate than in more democratic countries. Taxpayers are, however, more likely to experience administrative challenges when applying the applicable tax laws than would be the case under democracy. The result is a trade-off between value extracted directly in the form of tax and compliance or other regulatory costs. Conclusion: These findings make an important contribution to the tax literature by providing a multi-jurisdictional analysis of tax practice in a seldom-studied context. From a practical perspective, the findings can also inform the tax planning, risk management and reporting practices of organisations with material mining investments in Africa.