Diamond Smuggling and Taxation in Sub-Saharan Africa

This paper provides an overview of diamond mining in sub-Saharan African countries, and explores the reasons for substantial differences in their tax rates and fiscal revenues from the sector, which mainly arise from differences in the incentives for smuggling. In a theoretical model, we show that optimal diamond tax rates increase with the degree of competition among diamond buyers, as well as with the corporate share of diamond production, which is confirmed by the data. We then discuss policies to increase revenue, including by enhancing mining productivity, stimulating the exploration of new areas, reducing barriers to entry, and attracting investment into value-adding downstream operations.
Publication date: August 2003
ISBN: 9781451858204
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Economics- Macroeconomics , Economics- Macroeconomics , diamond , mining , nonrenewable resource , optimal taxation , diamond mining , taxation , tax rates , fiscal revenue , Extraction , and Refining: Other Nonrenewable Resources , Exhaustible Resources and Economic Development

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