Value Added Tax (VAT) is becoming common worldwide, but some countries have chosen not to
adopt this taxation tool because of the high level of paperwork required by both the taxpayer and
the government. In nations where VAT is imposed, it is commonly applied to most purchases,
both in terms of capital goods as well as services.
Because it is a “consumer” tax and export
minerals must compete globally, almost all mineral-exporting countries have chosen to negate the
impact of the tax on export mineral sales.
The means to achieve this negation vary widely and
involve varying degrees of complexity and government administration. The simplest form of
negation is an outright exemption for qualifying projects or products.
VAT applied to imported equipment and services can be a heavy burden on a capital-intensive
Because export sales may be free of VAT the ability to offset is thus brought into
question. Most countries negate VAT on imported goods and services through schemes involving
exemption, rebates, crediting, refunds, or deferrals.
While many countries exempt or negate the
effect of VAT on projects that export, many do apply VAT to mining projects that serve domestic
markets - a form of selective discrimination.