Diamond Smuggling and Taxation in Sub-Saharan Africa

24 Pages Posted: 2 Feb 2006

See all articles by Nienke Oomes

Nienke Oomes

International Monetary Fund (IMF)

Matthias Vocke

International Monetary Fund (IMF)

Date Written: August 2003

Abstract

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.

Keywords: diamond mining, nonrenewable resource, optimal taxation, tax evasion

JEL Classification: H21, H26, L72, Q32

Suggested Citation

Oomes, Nienke and Vocke, Matthias, Diamond Smuggling and Taxation in Sub-Saharan Africa (August 2003). IMF Working Paper No. 03/167, Available at SSRN: https://ssrn.com/abstract=880200

Nienke Oomes (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Matthias Vocke

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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