Tax Policy Challenges in the 21st Century

S. 657I. Introduction

The importance of resource taxation should be apparent. Mineral wealth plays a substantial role in many national economies. The IMF (2012) identifies 22 countries where petroleum revenues comprise at least 10 percent of the national GDP, a fraction that rises as high as 80 percent (Angola) or even 90 percent (Timor Leste) in certain cases. Mining revenues typically constitute a smaller share of GDP but, due to surging commodity prices, this factor is large and growing. And extractive resources loom especially large as a source of government revenue. Boadway and Keen (2010) list 37 petroleum-rich nations where the fraction of government revenue drawn from oil and gas operations ranges between 10 percent and 97 percent, averaging 50 percent overall. A separate listing of 10 mineral-rich nations shows mining’s share of total government revenue ranging between 1 percent and 44 percent, averaging 11 percent overall.

Since the emergence of the modern extractive industry at the turn of this century, international companies rather than the country itself have controlled extractive exploration and exploitation in developing countries because the latter lack the capital and exp...