Complete Book PDF (4.12MB) - World Bank eLibrary

386 Diagnosing Corruption in Ethiopia
• License conditions. The licenses specify the conditions with which the
licensee must comply in prospecting, exploring, or mining. In particular,
the conditions specify the license area; the type of mineral that can be
mined; the equipment and resources that the mining company must
use; the work program; and any applicable environmental, health and
safety, or social conditions.
• Mining revenues. A mining company operating in Ethiopia must pay
royalties and taxes to the relevant licensing authority. Royalties are calculated
on the mineral output of the mine—currently 5 percent of sale
price for precious metals and 3 percent for other minerals. Income tax
of 35 percent is calculated on the mine’s net profits. Artisanal mining is
exempted from income tax. A tax of 10 percent is payable on dividends
distributed from taxable income after deduction of income tax.
• Compensation. The mining company is legally obligated to compensate
the people whose land or homes are lost or affected because of the
mining operation. The companies are not currently required in Ethiopia
to submit and comply with a social management plan. However, the
federal Ministry of Mines (as it is currently named, or MOM) now
encourages mining companies to consider a social management plan,
which may become a legal requirement in due course. Such a plan
could include housing, schools, hospitals, water, food, and so on for the
mine workers, their families, and the local community.
• Government permits may be needed for planning permission, building
approvals, safety and environmental issues, import and export clearances,
payment approvals, and currency exchange, among other matters.
• Customs duties. Mining equipment may be imported. Licensees are
exempt from custom duties and import taxes on the equipment,
machinery, vehicles, and spare parts necessary for mineral operations.
There are restrictions on sale of this equipment in Ethiopia.
Institutional Arrangements
Responsibility for controlling the mining sector in Ethiopia is divided
among federal, regional, and city licensing authorities who are responsible
for issuing all licenses; determining the conditions imposed at the time
of license issuance; monitoring mine operations to ensure that mining