Countries rich in oil and mining resources often fail to secure their fair share of that wealth. The loss of revenue from the extractive sector is particularly significant.
On the one hand companies employ various strategies to minimize their payments to governments and on the other hand Government efforts to address these strategies are driven by weak institutions, inadequate policies and regulations, poorly negotiated contracts and insufficient monitoring and auditing by the government.
There have been several activities in recent years, at the international national level, to combat tax evasion in the extractive sector. But much more still needs to be done. Reliable data on the volume of lost revenue are not available. However, the experiences of both developed and developing countries suggest that many billions of dollars in revenue are involved that should be paid to the government.
There are many mechanisms that companies use to reduce their payments to governments, but the paths are not limitless. Knowing the standards can help Governments to design more effective analyzes and avoid significant revenue losses.
Incorrect calculation of the price of gas and minerals, transactions between affiliated companies, transfer of prices, cost inflation are seen as one of the main sources of revenue minimization for the State in Mozambique.
In this context, this text establishes a revenue risk assessment framework that maps the main paths by which governments lose extractive sector revenue. The framework is based on case studies and is supported by public domain information on risks to government revenues.
