Diamond Smuggling and Taxation in Sub-Saharan Africa

Author/Editor:

Matthias Vocke ; Nienke Oomes

Publication Date:

August 1, 2003

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 03/167

Subject:

English

Publication Date:

August 1, 2003

ISBN/ISSN:

9781451858204/1018-5941

Stock No:

WPIEA1672003

Format:

Paper

Pages:

25

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