Mining Governance: An Effective Extractive Industries Revenue Collection System for Afghanistan
Publisher: Afghanistan Research and Evaluation Unit
Date: 2017
Topics: Extractive Resources, Governance
Countries: Afghanistan
Efficient administration of extractive industry (EI) revenues is a critical task for all resource-rich countries, especially those with weak administrative capacities. Since an integrated accounting, reporting and auditing system can encounter obstacles, even though it is a priority, it requires technical assistance to develop and implement. Due to the unique nature of EI operations, a variety of fiscal instruments are applied to revenue collection since, in addition to having a large tax base, the sector usually involves large non-tax rents such as royalties, surface fees, premiums, penalties, etc. Factors such as the high potential of rent generation, non-renewability of resources, asymmetry of information, high upfront costs and investment, the intensive nature of extraction operations in an uncertain market and challenging accounting and audit environment for fiscal control further complicate EI revenue management.Therefore, internationally accepted accounting and reporting standards have been developed to deal with key EI financial issues so that resource-rich countries could use them in sector policies, contracts, and licenses.