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Corruption in the Mining Sector: Preliminary Overview 403
mineral sales—thus reducing the mine’s reported net profit, in turn
reducing the income tax paid to the licensing authority.
• Inspectors and auditors solicit or accept bribes to agree with false
declarations.
• Mining is conducted without a license, and output is not declared.
• Mining is conducted outside the scope of the license, and output is not
declared.
° While carrying out its mining operation, the mining company may
uncover a mineral for which it does not have a license. Instead of
applying for the license, it may mine the additional mineral illegally
and transport it off-site for sale without declaring it to the licensing
authority and without paying royalty or profit tax on it.
• Mining companies illegally export mining products.
° A mining company may reduce its royalties and income tax payable
to the licensing authority by illegally exporting part of its production
out of the country. It may pay a bribe to an official to assist it in this
purpose.
• Mining products are sold illegally within Ethiopia.
Existing mining revenue procedures
Collection of royalties and income tax apparently depends almost entirely
on the mining companies’ self-certification of output and profit because
of the lack of resources at the Ethiopian federal, regional, and city licensing
authority levels. It would, therefore, be relatively easy for the mining
companies to exaggerate their capital and operating costs and understate
their output and profit.
In addition, artisanal mines currently appear to be an almost impossible
problem to monitor—bearing in mind the large number of artisanal
mines, the number of illegal mines, the small scale of the operations, the
high labor element of the mining, the lack of records kept by artisanal
mines, and the fact that the miners often personally keep and sell their
own share of the output. The shortage of inspectors makes it difficult to
find out about and monitor these mines, and it is also possible that local
officials may extort bribes from artisanal miners in exchange for not
reporting their illegal mining activities.
The risk of large-scale corruption in the payment of up-front premiums
to the government is eliminated by the fact that the Ethiopian government
does not currently require such payments. In some other
countries, this premium can be the largest single source of corruption.
However, the Ethiopian government does currently receive up-front