Low Government Revenue from the Mining Sector in Zambia and Tanzania: Fiscal Design, Technical Capacity or Political Will?

Overall, the trend for Sub Saharan Africa and for Zambia specifically, is clear from 2004/5 to recent years, as there have been either negative or low rates of national adjusted savings in contrast to the trend in most of Asia and Latin America. This implies a reduction in the national wealth. For non-renewable resources such as minerals, this reflects a situation whereby a physical asset with an inherent value has been inefficiently extracted from below the ground and transformed into a financial asset (from the point of view of the ultimate owner of the resource, the people or the country). Two basic things need to change to reverse this trend. The first is to capture a larger share of the resource rent, and the second is to invest that share more effectively to increase the national wealth. In this paper we have focused on the first challenge, in particular by examining the cases of Zambia and Tanzania in terms of collecting tax revenue from the mining sector, and estimating their foregone levels of tax revenue due to ineffective benefit sharing mechanisms. In this exercise we have provided a simple method or rule of thumb to estimate what could represent effective benefit-sharing in mining countries.