In Sierra Leone, mining companies are using low tax rates and off-shore intermediaries to shift profits out of the country and leave one of the world’s poorest countries even poorer, according to a new study by RWI partner DanWatch.
The West African nation has rich reserves of diamonds, gold, bauxite and iron that account for 60 percent of its annual exports, at $200 million. The market price for minerals has doubled in the last five years, but still, only $24 million from the country's mining industry winds up in government coffers—with most potential income lost through advantageous corporate income tax structures, low royalties and tax haven siphoning.
But the report, "Not Sharing the Loot: An Investigation of Tax Payments and Corporate Structures in the Mining Industry of Sierra Leone," explains how mining companies have negotiated beneficial agreements with the government and relied upon tax havens to retain maximum profits for themselves.
Sierra Leone's top mines, the report finds, are owned by off-shore intermediaries that make "excessive use of low-tax and high-secrecy countries"—tax havens like the British Virgin Islands or Bermuda. This enables them to declare minimal profits from Sierra Leone’s minerals despite the booming market.
Added to this is the laxity of Sierra Leone's own corporate tax regime, which combines abundant tax incentives and exemptions to appeal to foreign investors. As a result, only one of the country's top five mines pays any corporate income tax at all.
The report calls on the government to ensure that all mining contracts comply with the reforms in Sierra Leone's Mines and Minerals Act 2009 and other transparency and good governance standards in order to enlist more mineral wealth for national development.
The full report is available for download from RWI.
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- Sierra Leoneans Are Impoverished by Dodgy Mining Agreements (The Sierra Leone Telegraph)
