This report investigates Egypt’s mining taxation regime taking into account major governmenttaxes,fees and similar imposts. It compares each major type of direct and indirect tax levied on the mining industry with similar types of taxesinotherselected countries. In addition, it uses a model gold mine to compare theoveralleffectofstatutory taxes in Egypt as compared to the overall tax regimes in other nations.
The purpose of this report is to provide a neutral-partyexaminationoftheEgyptianmining taxsystem.Thereportspecificallylooks at whether the existing statutory Egyptian taxation system imposes a higher or lower overall tax-takeonnew mining investment than is imposedgenerallyon mines in other nations, to conclude whether the system is internationallycompetitive,andto make recommendations for specific matters that concern fiscal reform. The recommendations are those of the Author and do notnecessarilyreflect the views of any other party.
The most important recommendation in this report is to reduce private sector perceived fiscal riskby:1) eliminating fiscal negotiations (set out all taxes and tax incentives in the respective laws), 2) create a fiscal system with an effective tax rate in the 40 to 50% range, and 3) not apply petroleum sector fiscal concepts to the mining sector.
The report contains the following:--
description of how tax fits in with mining company investment decision-making. descriptionoftheproprietarygoldmine tax assessment model used in the comparative analysis. table showing the relative position of the statutory Egyptian tax system applied tothe model mine as compared to taxation systems in selected other countries. summary of whether the statutory Egyptian tax regime imposes a higher or lower overall tax take than is imposed generally on gold mines elsewhere. sensitivity analysis of the tax system to price and cost changes. summaries indicating the relative position of Egyptian tax types versustheir counterparts in other selected nations. analysis of possible fiscal regime reforms and recommendations.
The effective tax rate comparativeanalysisutilizes a proprietary gold mine model developed bytheAuthor.Themodelisdescribed in detail in a March 2000 comparison of mining taxes worldwide. The study, Global Mining Taxation Comparative Study 2nd Edition, has been distributedworldwide by the United Nations, World Bank and the Colorado School of Mines. At the present time, the model is widely used in the comparative analysis ofminingfiscal systems, and the aforementioned study is a standard reference found on the shelves of most ministers of mines (Egypt received two copies of thestudyin2000fromUNCTAD).A description of the gold mine model is contained in an annex to this report.