## 1ginea2021002

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---

### A. Mining Revenues in Guinea: An Overview
- Mining constitutes 90 percent of Guinea’s total exports and 22 percent of its GDP.
- Guinea is the largest bauxite exporter in the world and the third-largest producer after Australia and China.
- Bauxite accounted for about 63 percent of total mineral production in 2019.
- Société Minière de Boké (SMB) and Compagnie des Bauxites de Guinée (CBG) accounted for 60 percent of total bauxite production.
- Current production of about 87 million tons in 2020 is small relative to estimated reserves of 7 to 9 billion tons; Guinea is home to one-third of the world’s known bauxite reserves (IFC, 2020).
- Gold made up 34 percent of mining production in 2019.
- Guinea is the 16th-largest exporter and the 13th-largest producer of diamonds.
- Simandou iron ore project: once exploitation construction starts (expected by 2027), Guinea could become the second-largest exporter and fifth-largest producer of iron ore in the world, with around 110 million tons expected annually.
- Industrial mining accounts for about 6.5 percent of formal employment.
- About 220,000 thousand people work in the artisanal gold sector.

### B. Trends in Mining Revenues
- Despite steady growth in mining-sector GDP and production, mining revenues grew only slowly or were stagnant over the past quarter-century.
- In the past decade, mining revenues declined relative to production and sectoral value-added, driven by falling corporate income tax revenues.
- Value of mining production rose sharply as of 2015, driven primarily by a sharp acceleration in bauxite volumes produced.
- Mining revenues in 2020 were 1.6 percent of GDP.
- Mining revenues reached their lowest recorded share of production and sectoral value added—at 6 percent and 7 percent respectively—since the earliest year with data (1990).
- Mining revenues have declined as a share of total revenues, reaching their lowest level in 2020.

### C. Guinea’s Mining Revenue Governance—an International Comparison
- The Mining Code and general legal framework are characterized as sound.
- Resource Governance Index (RGI) performance:
  - Guinea ranked 54th out of 90 resource-reliant countries on the index for quality of general legal framework and data disclosure.
  - Relative performance is significantly poorer on the index for quality of revenue management (provision of information on actual and projected resource revenues, interjurisdictional distribution, and prospects for national/subnational management).
- Conclusion: Weak performance on revenue management indicates more work is needed to ensure collected revenues are transformed into public goods benefiting citizens.

### D. Mining Revenues and the Fiscal Regime — Taxes and Charges
- Taxes and levies applied to mining include sector-specific levies (extraction/production taxes, export taxes, contributions to local development, required dividends) and general business taxes (corporate income tax, VAT, single land tax).
- Exemptions in the Mining Code (2013 amendment) include:
  - VAT exemption on imports of equipment and supplies on an authorized mining list (exploration and exploitation phases as specified).
  - Customs duty exemptions or reductions during research and construction phases and reduced duties during operational phase.
  - Exemption from the single land tax and minimum lumpsum tax during research and construction phases and the first three years of operational phase.
  - Exemption from apprenticeship tax, vocational training contribution and patent license during research and construction phases.
  - Corporate income tax rate for mining companies is 30 percent (versus 35 percent for non-mining companies).
- Key tax and contribution parameters:
  - Corporate income tax (CIT): 30 percent, base = Profits.
  - Value added tax (VAT): 18 percent, base = Imports, goods and services.
  - State participation: 15 percent equity (Bauxite, iron, also gold, diamonds, radioactive substances); government can acquire additional shareholding in cash up to a maximum of 20 percent.
  - Single property tax: 10 percent, base = Rental value.
  - Withholding tax: 10 percent on dividends and interest paid to foreign beneficiaries.
  - Payroll tax: 6 percent of salaries, wages, allowances and emoluments after deduction of family benefits contributions.
  - Contribution to local development: 0.5 percent of turnover for bauxite and iron; 1 percent for other minerals.
  - Extraction tax (production tax):
    - Bauxite: 0.075 percent of the value of the mineral extracted (base determined by grade, weight, and the 3-month LME seller price of primary aluminum).
    - Iron, copper, tin, nickel, zinc, cobalt, titanium, molybdenum: 3 percent (base determined by FOB price; for iron, based on the Platts China index).
    - Silver, gold, platinum group metals, palladium, rhodium: 5 percent (base determined by the London PM fix price index).
  - Export tax:
    - Bauxite: 0.075 percent of the value of the mineral exported.
    - Iron, copper, tin, nickel, zinc, cobalt, titanium, molybdenum: 2 percent.

### E. Mining Contracts’ Deviations from the Broad Legal Framework
- Deviations from the Mining Code are prevalent in various mining agreements, including contracts signed after 2013; deviations generally provide a more generous regime for companies than the Code.
- Examples:
  - Alufer/Bel Air (contract for bauxite production signed February 2016):
    - Reduced customs duties: equipment imported benefits from customs regime intended for construction phase although applied during operational phase.
    - VAT avoidance: creation of an ad-hoc “VAT group” between company, subcontractors and suppliers enabling intra-group charges without paying VAT; no explicit legal basis in the Code.
    - New and extended exemptions: exemption from corporate income tax for 6 years and from minimum corporate income tax for five years from production start, while the Mining Code provides no CIT exemption and only a three-year exemption from the minimum lumpsum tax from production start.
  - Societé des Mines de Mandiana (SMM)/Avocet Mining/Managem (agreement December 2016 for gold production):
    - Contract includes an exemption from corporate income taxes for six years from the start of production, contrary to the Mining Code.
    - Contract established a tiered rate for the tax on production which declines when the price of an ounce of gold is lower; the Mining Code sets the tax on production at 5 percent of the value of the gold.
- Charlet et al. (2018) found that of five selected contracts signed after the Mining Code adoption, all breached the Code, each on average in over nine different aspects.

### F. Competitiveness and Policy Implications
- Guinea’s tax regime is deemed sufficiently competitive internationally for mining investment; signing contracts that contravene the Mining Code is unlikely to be necessary to attract companies.
- Policy gaps and recommendations:
  - Adoption of a revised General Tax Code with detailed transfer pricing rules and documentation is important to align Guinea with peers that have robust transfer pricing regimes.
  - Peers’ recent mining contracts (e.g., Côte d’Ivoire, Burkina Faso) generally do not depart from their mining codes.
  - Corporate income tax exemptions during exploration are common; however, neither Mali nor Burkina Faso have a CIT holiday during the exploitation phase.
  - Côte d’Ivoire moved from a 5-year CIT exemption to a rebate of 75 percent in the first year of production and 50 percent in the second year (changed in 2018).
  - Withholding tax on interest paid abroad is applied by Mali, Côte d’Ivoire, Burkina Faso and is present in Guinea’s legal code, reducing risk of artificial financial arrangements.
  - Guinea does not tax artisanal gold while some peers do (example: Zambia).
- Other competitiveness factors:
  - Guinea’s bauxite is generally of higher physical quality compared to Australia, India, and Indonesia, lowering processing costs into alumina.
  - China’s domestic bauxite deposits are declining and of lower quality, increasing its reliance on imports such as from Guinea.
  - Export restrictions in competitor countries (Indonesia, Malaysia) have enhanced Guinea’s relative attractiveness.

### C. Potential Gains in Mining Revenue, and Policy Options

- Capturing Resource Rents and Tax Potential:
  - Guinea’s natural resource rents were generally captured by revenues during the mid-1980s, but the gap between rents and revenues rapidly widened starting from the 1990s.
  - Tax potential analysis estimates:
    - Overall tax revenues are estimated at an average of about 7.3 percent of GDP higher than they were in the course of the last decade.
    - Resource revenues are estimated at an average of about 5.0 percent of GDP higher than they were in the course of the last decade.
  - Regression analysis details:
    - Uses panel data of low-income and developing countries.
    - Revenues (as percent of GDP) are regressed on variables including GDP per capita, development aid, government investment and consumption, external debt stocks, industrial value-added, and inflation.
    - Regressions include country fixed effects.
    - Data availability: tax revenues from 1990; resource revenues from 2000.

- Simulation of Potential Revenue Gains from Removing Selected Tax Privileges:
  - Methodology:
    - An IMF mining forecasting FARI-like model built for Guinea is used to simulate potential revenue gains from three modest hypothetical reforms applied for one year and to selected mining companies.
    - Confidential corporate data were used; companies’ identities are not stated in the text but were presented to authorities.
    - Note: stability clauses in mining contracts may prevent reversing provisions that violate Codes; the simulation illustrates potential gains if derogatory exemptions were modestly scaled back.
  - The three hypothetical, one-year reforms simulated:
    - Increase of bauxite prices for two companies to the average of seven companies for which the model has adequate price data (a first-order approximation toward arms-length transfer pricing).
    - Adoption of a more standard cost structure for one company, with more typical limits on deductible interest; simulated unit-costs remain 20 percent above that of a key competitor.
    - Removal of a corporate income tax exemption for one mining producer for one year; the company’s contract stipulates a 5-year corporate income tax exemption from the start of commercial production, in violation of the Mining Code.
  - Simulation results (summary):
    - These limited reductions in tax privileges would raise revenues that could deliver substantial development benefits.
    - The gains amount to:
      - nearly 4 times the country’s agriculture budget,
      - more than three-quarters the totality of international development grants,
      - over half of the health budget,
      - over half of the education budget.
    - The simulation-based estimate is likely a lower bound as it does not reflect behavioral responses of mining companies to tax incentives.

- Limiting Profit-Shifting Arising from Transfer Pricing Schemes:
  - Transfer pricing: setting a price for purchase of goods or services between affiliated parties.
  - Abusive transfer pricing reduces combined taxable income by shifting profits to low-tax jurisdictions.
  - Acute risk in the bauxite sector: many bauxite producers are affiliated with aluminum producers abroad, raising incentives to underprice bauxite exports and shift profits.
  - Mining royalties are not directly affected by invoiced price manipulation because royalties are based on a publicly available price index.
  - Legal framework:
    - Mining Code (Article 138-III) and General Tax Code (CGI) (Article 117) obligate sales at arm's length prices and require add-backs for profits indirectly transferred to related companies abroad.
    - CGI identifies discrepancies between actual prices and arm’s-length prices and sets documentation requirements.
    - A revised draft General Tax Code (receiving IMF TA in 2019 and 2020) reinforces transfer pricing documentation requirements but has not been adopted.
  - Capacity constraints: tax authorities lack the technical capacity, time, and resources to systematically verify pricing methods used by mining title holders.

- Establishing National Pricing Guidelines for Bauxite:
  - Proposed approach under constrained capacity:
    - Establish a priori what would be considered an arm’s-length price for bauxite via a regulatory framework (decree by the Minister of Budget, possibly jointly with Minister of Mines).
    - Companies departing from the guideline must provide detailed justification and documentation and would face more rigorous verification.
  - Pricing methodology considerations:
    - Physical characteristics and quality: moisture content, alumina content, presence of impurities (iron oxide, silica).
    - Market circumstances: global supply and demand for bauxite.
    - Transaction costs: freight and insurance to derive an FOB price.
  - Use of available indices:
    - Aluminum equilibrium prices (e.g., London Metal Exchange (LME)) are already used as bases for extraction and export taxes.
    - Bauxite price indices (CRU, Asian Metal, CBIX) could inform national arm’s-length price guidelines; these indices may require subscription.
    - Limitation: indices can be influenced by policy decisions of major bauxite-purchasing countries.
    - Recommendation: government publish the final methodology and resultant bauxite prices frequently and timely for transparency.

- Potential Timing and Modality of Implementation of National Pricing Guidelines:
  - Two-step approach:
    - Step 1 — Safe harbor: national pricing guideline functions as a safe harbor; companies adhering are considered compliant. Companies may depart but bear burden of proof to justify that the methodology is inappropriate and their pricing is arm’s length. Benefits: potential short-term revenue increases; consistency with Article 182 stabilization clause (taxes and levies not to be changed for existing contracts for 15 years); method can inform ongoing tax audit programme.
    - Step 2 — Mandatory administrative price: determination of a mandatory administrative price for bauxite exports after studies of options and impacts. A transition period and stakeholder inputs are recommended.
  - Implementation timeline:
    - Administrative arrangements and agency preparation are required.
    - Full compliance with the national pricing standard would not be expected before the end of about a three-year period.

- Conclusions and Policy Implications:
  - Key findings:
    - The mining sector is central to Guinea’s economy, but mining revenues are anemic and weakening relative to production and value-added.
    - Guinea has a sound general legal framework (2013 amended Mining Code) and a revised draft General Tax Code with IMF TA that remains to be adopted; adoption is critical.
    - The Mining Code is often undermined by mining contracts that violate its articles and by poor implementation and enforcement.
    - Generous tax privileges for mining companies carry a high cost for Guinea’s development and citizens’ welfare; a modest reform could mobilize nearly 4 times the agriculture budget.
  - Policy options highlighted:
    - Address profit-shifting through transfer pricing mechanisms for both new and existing contracts.
    - Establish a national pricing guideline to function as a safe harbor, reversing the burden of proof for firms that wish to depart from it.
    - Study options, tradeoffs, and peer-country experience for generating revenue from artisanal gold, noting artisanal gold exports skyrocketed in 2020 and this subsector is untaxed in Guinea.
  - Preconditions for success:
    - Political will at the highest levels of government to implement robust mining revenue mobilization reforms.

*Source: MOBILIZING MINING REVENUE IN GUINEA, June 3, 2021, International Monetary Fund.*

### 1. The Role of Guinea’s Mining in its Economy and the World ______________________________ 2

### 1. The Role of Guinea’s Mining in its Economy and the World

### A. Mining Revenues in Guinea: An Overview
- Mining constitutes 90 percent of Guinea’s total exports and 22 percent of its GDP.
- Guinea is the largest bauxite exporter in the world and the third-largest producer after Australia and China.
- Bauxite accounted for about 63 percent of total mineral production in 2019.
- Société Minière de Boké (SMB) and Compagnie des Bauxites de Guinée (CBG) accounted for 60 percent of total bauxite production.
- Current production of about 87 million tons in 2020 is small relative to estimated reserves of 7 to 9 billion tons; Guinea is home to one-third of the world’s known bauxite reserves (IFC, 2020).
- Gold made up 34 percent of mining production in 2019.
- Guinea is the 16th-largest exporter and the 13th-largest producer of diamonds.
- Simandou iron ore project: once exploitation construction starts (expected by 2027), Guinea could become the second-largest exporter and fifth-largest producer of iron ore in the world, with around 110 million tons expected annually.
- Industrial mining accounts for about 6.5 percent of formal employment.
- About 220,000 thousand people work in the artisanal gold sector.

### B. Trends in Mining Revenues
- Despite steady growth in mining-sector GDP and production, mining revenues grew only slowly or were stagnant over the past quarter-century.
- In the past decade, mining revenues declined relative to production and sectoral value-added, driven by falling corporate income tax revenues.
- Value of mining production rose sharply as of 2015, driven primarily by a sharp acceleration in bauxite volumes produced.
- Mining revenues in 2020 were 1.6 percent of GDP.
- Mining revenues reached their lowest recorded share of production and sectoral value added—at 6 percent and 7 percent respectively—since the earliest year with data (1990).
- Mining revenues have declined as a share of total revenues, reaching their lowest level in 2020.

### C. Guinea’s Mining Revenue Governance—an International Comparison
- The Mining Code and general legal framework are characterized as sound.
- Resource Governance Index (RGI) performance:
  - Guinea ranked 54th out of 90 resource-reliant countries on the index for quality of general legal framework and data disclosure.
  - Relative performance is significantly poorer on the index for quality of revenue management (provision of information on actual and projected resource revenues, interjurisdictional distribution, and prospects for national/subnational management).
- Conclusion: Weak performance on revenue management indicates more work is needed to ensure collected revenues are transformed into public goods benefiting citizens.

### D. Mining Revenues and the Fiscal Regime — Taxes and Charges
- Taxes and levies applied to mining include sector-specific levies (extraction/production taxes, export taxes, contributions to local development, required dividends) and general business taxes (corporate income tax, VAT, single land tax).
- Exemptions in the Mining Code (2013 amendment) include:
  - VAT exemption on imports of equipment and supplies on an authorized mining list (exploration and exploitation phases as specified).
  - Customs duty exemptions or reductions during research and construction phases and reduced duties during operational phase.
  - Exemption from the single land tax and minimum lumpsum tax during research and construction phases and the first three years of operational phase.
  - Exemption from apprenticeship tax, vocational training contribution and patent license during research and construction phases.
  - Corporate income tax rate for mining companies is 30 percent (versus 35 percent for non-mining companies).
- Key tax and contribution parameters (as presented in Table 1):
  - Corporate income tax (CIT): 30 percent, base = Profits.
  - Value added tax (VAT): 18 percent, base = Imports, goods and services.
  - State participation: 15 percent equity (Bauxite, iron, also gold, diamonds, radioactive substances); government can acquire additional shareholding in cash up to a maximum of 20 percent.
  - Single property tax: 10 percent, base = Rental value.
  - Withholding tax: 10 percent on dividends and interest paid to foreign beneficiaries.
  - Payroll tax: 6 percent of salaries, wages, allowances and emoluments after deduction of family benefits contributions.
  - Contribution to local development: 0.5 percent of turnover for bauxite and iron; 1 percent for other minerals.
  - Extraction tax (production tax):
    - Bauxite: 0.075 percent of the value of the mineral extracted (base determined by grade, weight, and the 3-month LME seller price of primary aluminum).
    - Iron, copper, tin, nickel, zinc, cobalt, titanium, molybdenum: 3 percent (base determined by FOB price; for iron, based on the Platts China index).
    - Silver, gold, platinum group metals, palladium, rhodium: 5 percent (base determined by the London PM fix price index).
  - Export tax:
    - Bauxite: 0.075 percent of the value of the mineral exported.
    - Iron, copper, tin, nickel, zinc, cobalt, titanium, molybdenum: 2 percent.

### E. Mining Contracts’ Deviations from the Broad Legal Framework
- Deviations from the Mining Code are prevalent in various mining agreements, including contracts signed after 2013; deviations generally provide a more generous regime for companies than the Code.
- Examples:
  - Alufer/Bel Air (contract for bauxite production signed February 2016):
    - Reduced customs duties: equipment imported benefits from customs regime intended for construction phase although applied during operational phase.
    - VAT avoidance: creation of an ad-hoc “VAT group” between company, subcontractors and suppliers enabling intra-group charges without paying VAT; no explicit legal basis in the Code.
    - New and extended exemptions: exemption from corporate income tax for 6 years and from minimum corporate income tax for five years from production start, while the Mining Code provides no CIT exemption and only a three-year exemption from the minimum lumpsum tax from production start.
  - Societé des Mines de Mandiana (SMM)/Avocet Mining/Managem (agreement December 2016 for gold production):
    - Contract includes an exemption from corporate income taxes for six years from the start of production, contrary to the Mining Code.
    - Contract established a tiered rate for the tax on production which declines when the price of an ounce of gold is lower; the Mining Code sets the tax on production at 5 percent of the value of the gold.
- Charlet et al. (2018) found that of five selected contracts signed after the Mining Code adoption, all breached the Code, each on average in over nine different aspects.

### F. Competitiveness and Policy Implications
- Guinea’s tax regime is deemed sufficiently competitive internationally for mining investment; signing contracts that contravene the Mining Code is unlikely to be necessary to attract companies.
- Specific policy gaps and recommendations implied by comparisons with peers:
  - Adoption of a revised General Tax Code with detailed transfer pricing rules and documentation is important to align Guinea with peers that have robust transfer pricing regimes.
  - Peers’ recent mining contracts (e.g., Côte d’Ivoire, Burkina Faso) generally do not depart from their mining codes.
  - Corporate income tax exemptions during exploration are common; however, neither Mali nor Burkina Faso have a CIT holiday during the exploitation phase.
  - Côte d’Ivoire moved from a 5-year CIT exemption to a rebate of 75 percent in the first year of production and 50 percent in the second year (changed in 2018).
  - Withholding tax on interest paid abroad is applied by Mali, Côte d’Ivoire, Burkina Faso and is present in Guinea’s legal code, reducing risk of artificial financial arrangements.
  - Guinea does not tax artisanal gold while some peers do (example: Zambia).
- Other factors strengthening Guinea’s attractiveness without large tax holidays:
  - Quality of mineral is a priority for investors; Guinea’s bauxite is generally of higher physical quality compared to Australia, India, and Indonesia, lowering processing costs into alumina.
  - China’s domestic bauxite deposits are declining and of lower quality, increasing its reliance on imports such as from Guinea.
  - Export restrictions in competitor countries (Indonesia, Malaysia) have enhanced Guinea’s relative attractiveness.

*Source: MOBILIZING MINING REVENUE IN GUINEA, June 3, 2021, International Monetary Fund.*

### 10.      Lastly, tax incentives are of course not without cost to the country. The next section

### C. Potential Gains in Mining Revenue, and Policy Options

### Capturing Resource Rents and Tax Potential
- Guinea’s natural resource rents were generally captured by revenues during the mid-1980s, but the gap between rents and revenues rapidly widened starting from the 1990s.
- Tax potential analysis estimates:
  - Overall tax revenues are estimated at an average of about 7.3 percent of GDP higher than they were in the course of the last decade.
  - Resource revenues are estimated at an average of about 5.0 percent of GDP higher than they were in the course of the last decade.
- Regression analysis details:
  - Uses panel data of low-income and developing countries.
  - Revenues (as percent of GDP) are regressed on variables including GDP per capita, development aid, government investment and consumption, external debt stocks, industrial value-added, and inflation.
  - Regressions include country fixed effects.
  - Data availability: tax revenues from 1990; resource revenues from 2000.

### Simulation of Potential Revenue Gains from Removing Selected Tax Privileges
- Methodology:
  - An IMF mining forecasting FARI-like model built for Guinea is used to simulate potential revenue gains from three modest hypothetical reforms applied for one year and to selected mining companies.
  - Confidential corporate data were used; companies’ identities are not stated in the text but were presented to authorities.
  - Note: stability clauses in mining contracts may prevent reversing provisions that violate Codes; the simulation illustrates potential gains if derogatory exemptions were modestly scaled back.
- The three hypothetical, one-year reforms simulated:
  - Increase of bauxite prices for two companies to the average of seven companies for which the model has adequate price data (a first-order approximation toward arms-length transfer pricing).
  - Adoption of a more standard cost structure for one company, with more typical limits on deductible interest; simulated unit-costs remain 20 percent above that of a key competitor.
  - Removal of a corporate income tax exemption for one mining producer for one year; the company’s contract stipulates a 5-year corporate income tax exemption from the start of commercial production, in violation of the Mining Code.
- Simulation results (summary):
  - These limited reductions in tax privileges would raise revenues that could deliver substantial development benefits.
  - The gains amount to:
    - nearly 4 times the country’s agriculture budget,
    - more than three-quarters the totality of international development grants,
    - over half of the health budget,
    - over half of the education budget.
  - The simulation-based estimate is likely a lower bound as it does not reflect behavioral responses of mining companies to tax incentives.

### Limiting Profit-Shifting Arising from Transfer Pricing Schemes
- Transfer pricing definition and risk:
  - Transfer pricing: setting a price for purchase of goods or services between affiliated parties.
  - Abusive transfer pricing reduces combined taxable income by shifting profits to low-tax jurisdictions.
- Acute risk in the bauxite sector:
  - Many bauxite producers are affiliated with aluminum producers abroad, raising incentives to underprice bauxite exports and shift profits.
  - Mining royalties are not directly affected by invoiced price manipulation because royalties are based on a publicly available price index.
- Legal framework:
  - Mining Code (Article 138-III) and General Tax Code (CGI) (Article 117) obligate sales at arm's length prices and require add-backs for profits indirectly transferred to related companies abroad.
  - CGI identifies discrepancies between actual prices and arm’s-length prices and sets documentation requirements.
  - A revised draft General Tax Code (receiving IMF TA in 2019 and 2020) reinforces transfer pricing documentation requirements but has not been adopted.
- Capacity constraints:
  - Tax authorities lack the technical capacity, time, and resources to systematically verify pricing methods used by mining title holders.

### Establishing National Pricing Guidelines for Bauxite
- Proposed approach under constrained capacity:
  - Establish a priori what would be considered an arm’s-length price for bauxite via a regulatory framework (decree by the Minister of Budget, possibly jointly with Minister of Mines).
  - Companies departing from the guideline must provide detailed justification and documentation and would face more rigorous verification.
- Pricing methodology considerations:
  - Physical characteristics and quality: moisture content, alumina content, presence of impurities (iron oxide, silica).
  - Market circumstances: global supply and demand for bauxite.
  - Transaction costs: freight and insurance to derive an FOB price.
- Use of available indices:
  - Aluminum equilibrium prices (e.g., London Metal Exchange (LME)) are already used as bases for extraction and export taxes.
  - Bauxite price indices (CRU, Asian Metal, CBIX) could inform national arm’s-length price guidelines; these indices may require subscription.
  - Limitation: indices can be influenced by policy decisions of major bauxite-purchasing countries.
  - Recommendation: government publish the final methodology and resultant bauxite prices frequently and timely for transparency.

### Potential Timing and Modality of Implementation of National Pricing Guidelines
- Two-step approach:
  - Step 1 — Safe harbor: national pricing guideline functions as a safe harbor; companies adhering are considered compliant. Companies may depart but bear burden of proof to justify that the methodology is inappropriate and their pricing is arm’s length. Benefits: potential short-term revenue increases; consistency with Article 182 stabilization clause (taxes and levies not to be changed for existing contracts for 15 years); method can inform ongoing tax audit programme.
  - Step 2 — Mandatory administrative price: determination of a mandatory administrative price for bauxite exports after studies of options and impacts. A transition period and stakeholder inputs are recommended.
- Implementation timeline:
  - Administrative arrangements and agency preparation are required.
  - Full compliance with the national pricing standard would not be expected before the end of about a three-year period.

### Conclusions and Policy Implications
- Key findings:
  - The mining sector is central to Guinea’s economy, but mining revenues are anemic and weakening relative to production and value-added.
  - Guinea has a sound general legal framework (2013 amended Mining Code) and a revised draft General Tax Code with IMF TA that remains to be adopted; adoption is critical.
  - The Mining Code is often undermined by mining contracts that violate its articles and by poor implementation and enforcement.
  - Generous tax privileges for mining companies carry a high cost for Guinea’s development and citizens’ welfare; a modest reform could mobilize nearly 4 times the agriculture budget.
- Policy options highlighted:
  - Address profit-shifting through transfer pricing mechanisms for both new and existing contracts.
  - Establish a national pricing guideline to function as a safe harbor, reversing the burden of proof for firms that wish to depart from it.
  - Study options, tradeoffs, and peer-country experience for generating revenue from artisanal gold, noting artisanal gold exports skyrocketed in 2020 and this subsector is untaxed in Guinea.
- Preconditions for success:
  - Political will at the highest levels of government to implement robust mining revenue mobilization reforms.

*Sources: IMF staff estimates based on WEO, ICTD (2020), WB (2021), and Guinea country team data.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1ginea2021002.pdf_