PERTH (miningweekly.com) – Advisory firm PwC has warned African nations against overtaxing investments in the resources sector.
Launching a new report on the second day of the Africa Downunder conference, PwC African practice leader and resource sector partner Ben Gargett said taxation and fiscal settings had been a contentious issue across the globe for a number of years, with emerging markets at the forefront of the debate.
“There are only so many profits and so much cash flow generated by a mining project. If the costs are too high, the project is uneconomic. The same applies to government taxes. If they are too great for the project, there is insufficient [room] left for the miner to generate a commercial return, Gargett said.
He pointed out that it was the miner who was bearing the full capital and operating risk of a mining project and added that the miner’s capital was mobile and decisions were made in the allocation of this capital on a regular basis.
“But further than that, in this tough market, where funding is scarce and hard to get, the decision may well be out of the hands of the miner and in the hands of those who finance such projects. The financiers are a further step removed and typically don’t have the same connection with the project or country and act on a pure commercial basis.
“Therefore, I would put it to you – that a smaller share of the pie is a better outcome for the government than no pie at all,” Gargett said.
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