Diamond Smuggling and Taxation in Sub-Saharan Africa

Download or read book Diamond Smuggling and Taxation in Sub-Saharan Africa written by Nienke Oomes and published by International Monetary Fund. This book was released on 2003-08-01 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.