IMF Working Papers

Value Added Tax in the Extractive Industries

By Artur Swistak, Nate Vernon-Lin

October 27, 2023

Download PDF Order a Print Copy
Order a Print Copy

Preview Citation

Format: Chicago

Artur Swistak, and Nate Vernon-Lin. Value Added Tax in the Extractive Industries, (USA: International Monetary Fund, 2023) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Lower capacity countries often struggle to administer the Value Added Tax (VAT) in the extractive industries, partly due to the large VAT refunds needs of this capital and export-intensive sector. Assuming that the first-best policy (apply the standard VAT to the extractive industry) is not possible in the medium-term, what should countries do? This paper systemically analyzes second-best VAT policy designs considering the impact of the VAT on three key stakeholders: the investor, domestic suppliers, and the tax administration. The analysis concludes that the generally preferred policy is to provide a VAT exemption for imports and either fully tax or exempt domestic supplies, although country characteristics (and, specifically the relative weighting of stakeholders) matter. Moreover, governments should make efforts to shorten refund delays and transition to a standard VAT over the longer-term.

Subject: Imports, International trade, Revenue administration, Tax allowances, Tax refunds, Taxes, Value-added tax, VAT exemptions

Keywords: EI company, Extractive industries, Fiscal regime design, Hydrocarbons, Imports, Input VAT, Input VAT recovery, Mining, Policy design, Tax allowances, Tax policy, Tax refunds, Value added tax, Value-added tax, VAT exemptions, VAT scheme

Publication Details

  • Pages:

    49

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2023/221

  • Stock No:

    WPIEA2023221

  • ISBN:

    9798400258145

  • ISSN:

    1018-5941

You May Also Be Interested In...

Bosnia And Herzegovina: Indirect Taxation Authority – Diagnostic Review Of Progress Of Reforms

November 8, 2024

The Federal Democratic Republic of Ethiopia: First Review Under the Extended Credit Facility Arrangement, Request for Modification of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia

November 4, 2024

Kenya: Seventh and Eighth Reviews Under the Extended Fund Facility and Extended Credit Facility Arrangements, Requests for Reduction of Access, Augmentation and Rephasing of Access Under the Arrangements, Modifications of Performance Criteria, Waiver of Nonobservance of Performance Criteria, and Review Under the Resilience and Sustainability Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Kenya

November 1, 2024

Public Investment Management Bottlenecks in Low-income Countries

November 1, 2024