Capturing a fair share of fiscal benefits in the extractive industry

For many Governments, their expectations of reaping a fair share of the high returns to the extractive industry over the last few years are not yet being realized. In light of likely continued good returns to the industry, at least in the medium-term, it is important for Governments to set up suitable arrangements, particularly in the fiscal arena. In order for them to do so, a number of conditions need to be met. First, there has to be an appreciation of the characteristics of the extractive industry and the Government’s bargaining strength. Secondly, there must be fiscal policy coherence between Government institutions to underpin suitable fiscal arrangements. Thirdly, it is necessary to ensure the availability of skills necessary to formulate fiscal policies and appropriate negotiating strategies. A final requirement for countries and Governments is the capacity to administer and enforce more sophisticated forms of taxation and contractual arrangements.